Wednesday, March 18, 2009


3/14/2009: Please keep reminding your elected public servants that the General Assembly needs to pass NOW the constitutional property tax caps in Senate Joint Resolution 1. You need to contact your State Representative, your State Senator, House Speaker Pat Bauer, and House Ways and Means Committee Chairman Bill Crawford. Contact information can be found at http://www.finplaneducation.net/general_assembly_ratings.htm.

House Speaker Bauer has assigned SJR 1 to the Indiana House Ways and Means Committee. Subject to the intricacies of Indiana House Rules, there are three ways to get SJR 1 out of the House Ways and Means Committee to the floor of the House for a vote.

(1) SJR 1 can be passed out of the House Ways and Means Committee in time for a third reading no later than April 15. For SJR 1 to be considered like any other important bill, Speaker Bauer and Chairman Crawford would have to have a change of heart where they give working families the same respect they give single-interest property tax spenders. SJR 1 has been denied a Committee hearing because of false claims that it is necessary to wait a year to get more information about property tax cap effects. This delaying tactic was negated by the updated report issued on January 5, 2009, by the nonpartisan Legislative Services Agency that details the impact of property tax caps for every local government unit. If SJR 1 ends up being voted out of the House Ways and Means Committee, Chairman Crawford as the House sponsor of SJR 1 will still have to "call down" SJR 1 for both second reading amendments and a third reading vote on the House floor.

(2) Any State Representative can make a motion to suspend House Rule #85 and call SJR 1 back to the House from the Ways and Means Committee. The motion must be seconded by 51 State Representatives and 67 votes are required to pass the motion. In the current political environment, what this means is that 6 House Democrats must join 46 House Republicans to get the motion seconded, and 21 House Democrats are needed to pass the motion. It is unlikely that so many House Democrats will defy Speaker Bauer to champion the cause of working families.

(3) The House Rules and Legislative Procedures Committee can pass a recommendation to suspend House Rule #85 and call SJR 1 back to the House from the Ways and Means Committee. The House may adopt the Committee recommendation by a vote of 51 State Representatives. If needed to pass SJR 1 on the April 29 last session day, 67 State Representatives can vote to use House Rule #83 to suspend the constitutional rule requiring a bill to be read on three separate meeting days. Because the Rules and Legislative Procedures Committee is controlled by Speaker Bauer, the best chance for SJR 1 passage this session is for Speaker Bauer to use this Committee to get SJR 1 to the House floor for a last-minute vote as part of a legislative compromise.

Governor Mitch Daniels, with the assistance of Senate Republicans, will have an opportunity at the end of this General Assembly session to reach a Taxpayer Friendly Compromise with Speaker Bauer. The Taxpayer Friendly Compromise should include passage of SJR 1 in return for accepting one of Speaker Bauer's legislative priorities (such as using some of the state's reserve funds in the next budget).

Hoosiers who value two-party Statehouse politics, or Hoosiers who identify with the Democratic Party, must convince Democrat leaders that it is good politics to allow an Indiana House vote this session on SJR 1. If there is no SJR 1 vote this year - no matter what is done next year - fully 60% of Hoosiers voting for State Representatives in 2010 will label Indiana Democrats as the party that opposes a fair and affordable state and local tax burden. No amount of campaign contributions from single-interest property tax spenders will be able to change this perception. Presidential politics was the tipping point that kept the Democratic Party in control of the Indiana House this year. There will be no presidential politics in 2010 to skew Statehouse election outcomes, and more 2010 Indiana House races will resemble the 2008 District 45 election than the 2008 District 89 outcome. The 2010 Indiana House election is particularly important because the next General Assembly will be responsible for redistricting. If House Democrat leaders block SJR 1 passage this year, enough House Democrats will be doomed to 2010 reelection failure that a Republican House will redistrict Indiana Democrats into irrelevance for the next decade!

APATHY IS NOT AN OPTION! You must ACT NOW if the constitutional property tax caps in Senate Joint Resolution 1 are to be saved! Otherwise, the single-interest property tax spenders will win and we will soon have NO property tax relief to show for the latest statewide sales tax increase. The constitutional property tax caps in SJR 1 are necessary for a more fair and affordable working family tax burden.

From Watchdog Indiana

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669

Hoosiers For Fair Taxation, Senator Delph, Representative Noe, Representative Elrod and many other legislators along with Stop Indiana, attorney John Price, Eric Miller's Advance America, and the Statewide Taxpayer Alliance know that property tax abolishment, without substantial increases in sales tax and income tax, is realistic and possible. The economist Dr. Bill Styring's 2/2/2 Plan demonstrates that the state of Indiana can completely replace property tax without changing the state's current spending habits.

Dr. Styring's plan does not account for positive changes in Indiana's economy that will undoubtedly follow the elimination of property tax such as heavy real estate investment and increased consumer spending due to increased statewide disposable income. The real estate investment in Indiana alone would cause such an economic boom that it could likely end our abandoned property and foreclosure crisis. Property tax elimination would also likely cause a surge in Indiana's population as more people locate to Indiana to take advantage of real estate purchase opportunities without the burden of property tax. With the population surge would come more sales and income taxes.

The General Assembly does not have to adopt a specific plan until the year 2011. In the meantime, we recommend that the General Assembly approves the 27steps outlined in the report prepared by the Sheperd Kernan commission. While the Governor's commission cannot forecast the savings to the state once the plan is implemented, there is no doubt that the savings would be substantial--perhaps equivalent to the the entire property tax burden currently placed on Indiana's homeowners because our legislators have not had the political will to liberate Indiana's governing structure and her taxpayers from the 19th century.

Our citizen networks will work to replace all legislators who do not support property tax repeal in the November 2008 election.

The 2/2/2 Plan, to replace property taxes in Indiana based upon the latest revenue forecast (07/08 fiscal, estimate):

1) Current IN sales tax (state level rate of 6%): $5.601 billion2% increase would yield an additional $1.867 billion

2) Current corporate profits tax: ~$2 billion

2% increase would yield an additional $.286 billion ($286M)

3) A 2% statewide average of the COIT would yield $2.705 billion to cover local civil units of gov.

By adding these three together ($1.867 billion + $.286 billion + $2.705 billion), a total of $4.858 billion is realized; enough revenue to replace property taxes.

Indiana has a 70-plus year history of attempts to lower property taxes by raising other, non-property taxes. In every case these have failed miserably. The new taxes, or higher rates on old taxes, remain in place. And, in short order, property taxes rise back to their old levels, poised to roar even higher.

--1933. General Assembly imposes two new taxes: an individual gross income tax and a corporate gross income tax. The morgue of the Indianapolis Star indicates that the political leadership at the time said this was for property tax relief (1933 was the pits of the Great Depression, and people were losing their homes. Home prices declined by over 40% in the 1929-1933 period). Property tax relief was nonexistent. The state used the money to bail out the state's own finances.

--1963. General Assembly imposes a new sales tax at a rate of 2% and changes the 1933 individual gross income tax (from 1933) to an adjusted gross income tax (the one we have now) at a rate of 2%. Again, the ostensible reason was for property tax relief and again little PTR was forthcoming.

--1967. Those 1963 tax changes were raising more money than projected. The GA decides to give back 8% of sales and income tax revenue to local government for property tax relief. Local units spent the money. No PTR.

--1973. Gov. Otis Bowen launches the most determined PTR offensive yet. The sales tax goes to 4% and a new corporate supplemental net income (profits) tax is imposed. Strict property tax levy controls are imposed. It works... for a time. By 1980, property taxes adjusted for inflation are some 30% lower than in 1973. When Bowen leaves office the levy controls are relaxed. By the end of the decade, property taxes (adjusted for inflation) are back to 1973 levels. The doubling of the sales tax rate from 2% to 4% remains in place, along with the new corporate SNIT.

--2002. More fiddling with the sales tax in the hope of property tax relief. The results of this are obvious, or we wouldn't be debating the current property tax mess. All of this suggests that unless the property tax is totally ripped up by constitutional amendment, the assessment and collection mechanism dismantled, it will grow back. The PTR-inspired hikes in other taxes remain. That is our history. It is a terrible deal for taxpayers.

2. A vote in the 2008 legislative session for a constitutional amendment to repeal property taxes does not amend the constitution. It merely starts the amendment process. Amendments must be passed by two consecutively elected General Assemblies, then submitted to a referendum. Thus any amendment passed by the '08 Assembly must be passed by either the 2009 or 2010 legislatures, then submitted to the voters at the 2010 general election. The General Assembly does not need to decide on a "replacement revenue" package until the 2011 session.

3. What might such a "replacement revenue" package look like? The particular answer will come from the 2011 General Assembly and cannot be determined now (if for no other reason than forecasting state level taxes and property taxes out that far would be a most unreliable exercise. No one need be locked into any particular plan just yet. However, as an illustration that a replacement plan is feasible and less scary than many fear (we don't need to be talking about a 12% or 13% sales tax ... in fact, we should not be), consider just this one possibility.

Local sales taxes are generally very bad policy, for a whole host of reasons too numerous to mention in this short sketch. Sales and corporate taxes are best levied at the state level. It happens that roughly a 2% increase in the sales tax and a 2% increase in the corporate profits tax roughly take care of school propertytaxes. The loss of local control by the state assuming school property taxes is minimal. About the onlylocal control left is on building projects.

For local civil units, a statewide average increase in the individual adjusted gross income tax of about 2% suffices to replace local civil government property taxes, higher than 2% in some units, less than 2% in others.

Thus, a "2-2-2" plan~2% sales and 2% corporate profits at the state level for schools and a 2% average on personal income taxes for civil units—is about what would be needed. This is merely a ballpark projection to 2011.

There may be better plans, it's really a policy question for the General Assembly: do you want to make the trade of something like this in exchange for no-property-taxes-forever-on-anything? Everyone understands "zero."

4. Are there "practical problems? Of course. The two identified are how to make the civil government transition from a property tax base to an income tax base, and how to handle debt backed by property taxes. Without elaborating, the former can be handled using locator software (Map quest-type programs). The debt problem might be handled by treating the current state paid PTRC's as in lieu of property taxes (which they are) and paying PT-backed debt service from each unit's own PTRC.

Conclusion: Total elimination of the property tax via constitutional amendment is the only way to give property tax relief that will stick. The other tax action necessary to achieve this goal—in 2011-are large but not so scary as "a 13% sales tax." They are feasible. The question is for the General Assembly. Are we going to once again go down that 70-odd year path of failed PTR policies or are we going to rip the property tax up by the roots?

Posted by Hoosiers For Fair Taxation on Friday, January 4, 2008.