A big issue in recent months and years in Indiana has been property taxes. Specifically, the public uproar every year when property taxes go up, in part because of past mistakes. Last Week Governor Daniels came out with his plan for relief, the text of his whole speech and presentation can be found here. While I am encouraged as a new homeowner that Daniels has at least decided to join the conversation (like I said, the need for property tax reform was something I was aware as soon as I moved to Valpo 4 years ago), and a discussion will hopefully lead to some positive results, I was, at times, less than impressed with the Governor’s plan.
First, before he gets to the plan details, he labels what the biggest culprit is, “total local spending on schools, libraries, school construction, and other services . . . .” Being in a school district that is currently undergoing a school expansion project that was difficult to get approval for, I can only imagine how such a statement will embolden detractors. I understand that some schools may and have approved designs that make construction costs higher. But, at least in the case of our school district, we already had two schools operating above capacity. A new building was needed. Despite this, it was a struggle to get a consensus approval for the project. I can only imagine the Governor’s comments will make it harder. Oh, and the other services referred to, are primarily things like police and fire personnel and service, which again, is not something most people want to cut back.
Next, he states
I have prepared and will recommend to the legislature a proposal to cut every homeowner’s property taxes sharply and cap them forever, at no more than one per cent of a home’s true value. This last provision must be added to the state’s constitution to ensure its permanence, and guarantee that no Hoosier ever again pays more than a penny on the dollar of their home’s value.
Great in theory, however it doesn’t address one of the biggest current problems – how do you determine the value of the property? That’s part of the reason why people are up in arms, because there is no way they could sell their house for the assessed value. Unless the way houses are assessed is fix, this doesn’t really solve many homeowners’ concerns. Oh, and while adding something to the constitution does make it seem permanent, it could be repealed later under a referendum when people are unhappy with the system in another 25 years. Implying that adding to the constitution makes it permanent, unchangeable, is a bit misleading.
Daniels also wants to remove the rest of school operating costs from local governments and have it funded by the state. On one level, this could ensure equal funding in disparate economic areas, which may be a good thing. However, from being around schools and being aware of their funding issues, they often cannot make some personnel decisions until a couple of weeks before school starts, sometimes even just a few days, because they are awaiting the distribution of funding from the state. To give all operating expenses to the state means communities won’t really be funding their own school anymore, and school administrators may constantly be waiting funds from the state that could be withheld for a myriad of reasons (like when Daniels withheld checks to local governments in 2006 so that at the end of the State’s fiscal year they would be in the black and have a balanced budget for press and political reasons, leaving local governments to scramble for a few weeks until they got the funding late).
Daniels also wants to raise the sales tax 1% to increase revenue. I am awaiting a study for someone to see how a 1% tax increase, in a low income state such as Indiana, is going to effect the overall economy and consumer spending. Also, the sales tax is state income, so this plan effectively reduces the amount of money local governments get through taxes and increases the amount the state gets.
Next Daniels says that the biggest change must come in the form of controlling local government spending. He states:
As further protection against overspending, we should strengthen taxpayers’ direct say in local decisions, especially the borrowing for new schools and other construction which has been the biggest driver of property tax increases. I will propose that any significant new capital project, or any spending in excess of the growth in local income, must be approved by voter referendum.
Seriously. You must be joking. I understand most people may think this is good. But putting these decisions in the hands of voter referendum is not the answer. Its like asking voters if they want to have their taxes raised, never would a majority of voters choose that. I understand that putting more power into the hands of voters comes off as a great idea and a good movement. But funding decisions are a bit tricky. In my former state of Michigan, they put school funding on voter referendums before, and now their school system is in disarray and local schools can’t get bonds approved to build new schools to replace buildings that struggle to keep up to code.
Like I began with, I am glad Daniels is addressing the issue, because that usually means that some reform will take place. I am just not sure that all these changes won’t just create a new set of problems while leaving some not addressed. Also, I think he is seeing the problem, as do many politicians, in a vacuum. He looks at property taxes, says school spending is out of control, and reacts to that. Yet, earlier in his administration, he bemoans the fact that the Indiana has trouble attracting high tech and professional occupations because of the lack of higher education through poor primary school performance and college graduates leaving the state. I understand the answer to this is not simply to throw more money at the problem, but its not to reduce money. Decisions have to be made in light of how they affect other priorities, and sometimes, people have to live with certain things, i.e. higher taxes, to get things that are needed, i.e. police and fire protection, good roads, improved school facilities, and so on. I hope when the discussion starts when the legislature meets in January will not be a compartmentalized discussion, but instead will look at the effects such a plan and ultimate change will effect the other priorities, goals, and needs of Indiana.
Filed under: Politics
