The Governor Giveth, and the Governor Taketh Away

Property tax relief in Indiana has become more about "robbing Peter to pay Paul" in many ways, depending on your personal situation.

Today, Governor Mitch Daniels is expected to sign a property tax reform bill, which will provide tax relief and supposedly permanently guard against future property tax increases. At the same time, he is offsetting these lost revenues to the State with an increase in sales taxes from 6% to 7% as of April 1st. No, that's not an April Fools Day joke.

As you'll recall, it wasn't so long ago that we saw a one percent increase from 5% to 6%. In fact, that change became effective on December 1, 2002. (Personally, I found the date of this last change as an interesting attempt to collect higher revenue during the 2002 Christmas season, while also coming about a month AFTER the November elections of that year, but I digress.)
To see how we stack up to other states (at least as of January 1, 2007), The Federation of Tax Administrators, a non-profit corporation, provides the following sales tax comparison chart http://www.taxadmin.org/FTA/rate/sales.h...

On the plus-side of these tax changes, elderly Hoosiers should benefit from lower property taxes on their homes, while they won't see higher sales taxes on necessities, such as food and prescription medicine, as both are exempt from Indiana's sales tax. I refuse to say it will benefit the often-quoted "those on a fixed income" because I believe EVERYONE is on a fixed income, but you know what I mean nonetheless.

Some also argue that an increase in sales tax is a more "fair" way to tax since it taxes consumption, as opposed to property tax increases where assessments are often outdated, incorrect, and/or very difficult to gauge the "fairness" from one to another. Some even argue that property taxes are socially counter-productive and lead to less pride in the community since taxes go up as a person takes better care, maintains, and improves a property.

The bill has passed rather quickly, so it's gone from "just talk" to actual law in a short amount of time. Many Hoosiers have been in disbelief all along the short path, too, thinking it would never happen. Well, it is, but I wonder if the haste of this bill's enactment has been actually counter-productive -- at least in the short-term. Many businesses could have had "beat the tax" sales to clear out slow-moving inventory, but they didn't get much of a chance to do so.

If the bill was passed with a later effective date, this could have bolstered sales within Indiana, even though it may have been short-lived. As the national economy is worsening, many belts are also tightening, so it seems people really need some reason to buy now rather than later.

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This blog post by Chris Wathen was also published in his Linton, Indiana based Greene County Daily World blog entitled, “Riddle Me This”.