Thursday, April 2, 2009


Chesterton Tribune

A Senate Committee on Tuesday approved a plan to create a four-county transportation district with the powers to impose a new income tax in Lake, Porter, LaPorte and St. Joseph counties for current and future rail and bus service in the region, potentially giving a big boost to the South Shore extension.

The Senate Committee on Homeland Security, Transportation & Veterans Affairs unanimously passed a lengthy amendment to H.B. 1607 that would create a nine-member Northwest Indiana Regional Transportation District made up of county commissioners and county council members from the four counties.

The new transit agency would have the authority to impose an income tax of up to 0.25 percent on taxpayers in each of the four counties, with the rate determined by the level of bus and rail service in each county. The tax rate could go up or down in each of the four counties to correspond with the level of capital and operating funds in each county, as long as the rate does not exceed 0.25 percent.

The amendment appears to give the new transit board full authority to impose the tax, with no other local approval required, by a majority vote among the nine members. That suggests that a tax could be imposed in any of the four counties even if that individual county’s representatives vote against it.

The new regional agency would have separate rail and bus divisions. According to the amendment language, the current operators of the South Shore commuter service -- the Northern Indiana Commuter Transportation District -- would become the rail division of the new district. The Northwest Indiana Regional Bus Authority would be rolled into the bus division, as would bus services run by municipalities, such as those in Valparaiso, Gary and Hammond.

The new district board would be made up of one county commissioner and one county council member from each of the four counties. The county council member is to be the council president or another council member designated by the president.

The governor would appoint the ninth board member. This individual would serve as the district board chair and would not have voting powers, except to break a tie. The governor appointee must be an elected official from one of the four counties.

Among other responsibilities, the new transit board would hire an executive director and would have the authority to own property and to bond for capital improvements. As a public agency, its property would be exempt from property taxes.

The amendment approved Tuesday calls for the new income tax -- called the Regional Transportation Improvement Income Tax -- to take effect on Oct. 1 in the year that the tax is adopted, after the transit board approves a resolution and gives public notice of the tax in each county in which it is proposed.

The Senate Committee passed the amendment 8-0 ; the only Northwest Indiana lawmakers on the committee are Sen. Earline Rogers, D-Gary, and Jim Arnold, D-Michigan City.

The bill now moves to the Senate Committee on Tax and Fiscal Policy. The Northwest Indiana lawmakers on that committee are Ed Charbonneau, R-Valparaiso; Sue Landske, R-Cedar Lake; and Lonnie Randolph, D-Gary.

The original House bill, authored by State Rep. Chet Dobis, D- Merrillville, was called the “West Lake” bill and called on the Northwest Indiana Regional Development Authority to establish separate funds for the South Shore extension to Lowell.

Dobis’ original bill also included language to require that the members of the RDA -- including Porter County -- remain as members for at least 10 years.

Dobis’ bill was amended in the House to include $53 million in appropriations from the federal stimulus bill for the South Shore commuter service as well as transit services in central Indiana. More specifically, the appropriations included $15 million toward the relocation of the South Shore tracks at the South Bend airport, $5 million for rail improvements in Michigan City, and $15 million for the initial engineering and environmental studies for the South Shore expansion to Lowell.

The amendment approved by the Senate Committee on Tuesday takes the House bill a giant step forward, by setting up a new government entity, as well as a local funding mechanism, for current and expanded rail and bus service.

Dobis’ bill passed the House 68-31. In the Senate, the bill’s sponsors are Luke Kenley, R-Noblesville; Karen Tallian, D-Ogden Dunes; and Ed Charbonneau, R-Valparaiso.

If the Senate-amended bill passes the full Senate, the bill would be sent to a conference committee, to resolve the differences between the House and the Senate versions.

The original language in H.B. 1607 requiring that the members of the RDA remain members for at least 10 years remains in place.
Posted 4/1/2009

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.