"IT IS THE DUTY OF THE PATRIOT TO PROTECT HIS COUNTRY FROM THE GOVERNMENT." - THOMAS PAINE (1737-1809)


Thursday, April 2, 2009

SENATE PUSHES TRANSIT TAXING BOARD FOR REGION

April 1, 2009
By John Byrne
Post-Tribune staff writer

INDIANAPOLIS -- Legislative supporters of rail and bus funding for Northwest Indiana are trying a new tack to get local taxpayers to foot the bills for the projects.

The Senate Transportation Committee voted Tuesday to create a four-county regional transportation district em-powered to levy an income tax as high as 0.25 percent to pay for mass transit in Lake, Porter, LaPorte and St. Joseph counties.

The ambitious plan could raise $52 million per year to subsidize big-ticket capital projects and operating expenses, circumventing the local officials who have been unwilling or unable to adopt a tax themselves, particularly in Lake County.

If the income tax were levied at its maximum amount for each county, Lake County residents would kick in $22 million annually, Porter $12 million, LaPorte $5 million and St. Joseph $15 million, according to Sen. Luke Kenley, R-Noblesville, who offered the proposal as an amendment to a House transportation bill.

Not coincidentally, Kenley's plan could pay the $350 million local share of the $1 billion-plus South Shore rail extension to Lowell and Valparaiso, and underwrite bus service in the area.

"There is a rough correlation there," Kenley, R-Noblesville, told the committee in explaining why he settled on a 0.25 percent maximum.

The nine-member, first-of-its-kind "super board" Kenley envisions would include a county council member and a county commissioner from each county, as well as a governor-appointed chairman, who would vote only to break ties.

The state budget agency would get final say on how high an income tax residents of each county would get saddled with, taking into account the capital improvement needs in each county, and the number of passengers and passenger miles each county contributes to regional mass transit.
Lake County, where a lot of work is required to complete the South Shore extension, might get a high capital assessment.

St. Joseph County requires less construction, but passengers heading into Chicago travel farther, adding to the operating assessment as the state figures an appropriate tax.

U.S. Rep. Pete Visclosky, D-Merrillville, has pledged $500 million in federal transportation funds for the rail extension.

But the project has foundered in the General Assembly for lack of local matching revenue.

State Rep. Chet Dobis, D-Merrillville, said there seems to be greater momentum to get something done now.

"I'm more optimistic now than I was at this time last year," said Dobis, a staunch supporter of the South Shore rail project.

Before it becomes law, however, the package has to get approval from the full Senate and head to conference committee for further consideration. If it does run that gauntlet, the bill may end up looking far different from the one approved Tuesday.

Other provisions

In addition to funding bus and rail systems in the region, the board would set goals and standards for those divisions to meet.

The Northern Indiana Commuter Transportation District, administrator of the South Shore commuter rail line, would report to the new board.

So would a bus service division created by the statute, which could spell the end of the Regional Bus Authority.

Dobis, author of the transit bill Kenley amended, voiced his disdain for the RBA during testimony Tuesday.

"Our RBA today, is a disaster," Dobis told the committee. "We have no idea where they're going."

Revealing a possible point of contention as the bill advances, committee member Sen. Earline Rogers, D-Gary, defended the RBA.

"There are many among us who don't consider the RBA a disaster," she said.

Though she believes it will cut the RBA out of administering the region's troubled bus system, Rogers nonetheless voted for the proposal because it acknowledges the need for buses in Lake County.

Kenley's amendment stripped out of the bill language that would have directed $35 million in federal stimulus funds to South Shore rail projects in Lake County, Michigan City and South Bend.

The bill passed the Transportation Committee 8-0, and will next head to the Senate Tax and Fiscal Policy Committee for more debate.

Sen. Brandt Hershman, R-Wheatfield, chairs Tax and Fiscal Policy.

He has expressed reservations about allowing Lake County to raise new taxes, arguing elected officials in Indiana's northwest corner haven't done enough to cut spending.

But Hershman said the cross-county membership of Kenley's board quiets his concerns.

"It makes me feel a little better that there would be a level of regional collaboration," he said.

Contact John Byrne at 317-631-7400 or jbyrne@post-trib.com

Posted by Team Hammond at Thursday, April 02, 2009

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

IMMEDIATE RELEASE
Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669
www.HoosiersForFairTaxation.com

BLUNT PROOF OF THE FEASIBILITY TO PERMANENTLY ABOLISH PROPERTY TAX.
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.

PROPERTY TAX HISTORY PREPARED BY DR. BILL STYRING
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.