Tuesday, August 28, 2007

looking at property tax abolition

From Tuesday's C-J:

The Commission on State Tax and Finance met on Monday to discuss the prospective elimination of property-- and ways in which the same revenue might be replaced by other (higher) taxes.

Diane Powers, director of the fiscal and management office within the Legislative Services Agency, provided estimates of higher sales and income taxes needed to compensate for trashing property taxes. Her estimates:

  • Increasing the individual income tax from 3.4 percent to 9 percent, a 165 percent increase. For a family with a taxable income of $75,000, that would be an increase of $4,200 annually. An individual with taxable income of $25,000 would pay $1,400 more.

  • Increasing the state sales tax from 6 percent to 13.2 percent, a 120 percent increase. It would mean a pair of $30 jeans would cost $2.16 more. A $15,000 vehicle would cost an extra $1,080.

  • Increasing the sales-tax rate to 11.1 percent and expanding it to cover all services except medical costs. That would add a $2.22 tax to the price of a $20 haircut or add $555 to a $5,000 legal bill.

  • Eric Miller, founder of the Indiana-based conservative lobbying group Advance America, also testified yesterday. He offered his own plan, one he's been selling across the state. (Mr. Miller will also speak at a forum in New Albany tomorrow.)

    His proposal includes raising the sales tax by 2 percentage points, increasing the income tax by 1 percentage point, creating or increasing a business tax that he has not detailed, and capping state and local spending. Miller said that combination -- particularly a reduction in spending growth -- would eventually be enough to replace the property tax.

    Legislative fiscal leaders, though, are skeptical about Miller's plan. They balked yesterday at some of his data, questioned the ability of government to reduce growth to the levels he proposed, and raised concerns about the proposal's long-term viability.

    I don't know about Miller's numbers. But I appreciate his desire to put tax reform proposals on the table-- and especially, to control spending. Of course, whatever politicians think of his tax revenue shuffling, it's no surprise that most of them are going to be quite opposed to any sort of fiscal conservatism!

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