on Daniels' property tax plans

From Lesley Stedman Weidenbener in today's C-J...

Hoosiers would see the state sales tax rise by one percentage point and property-tax bills drop by about one-third next year under a complicated plan that Gov. Mitch Daniels proposed yesterday.

The sales tax rate would increase to 7 percent, moving it higher than Kentucky's rate of 6 percent. But the plan would give Hoosier homeowners the ninth-lowest property-tax bills in the country, the governor's office said.

If approved by the legislature during its 2008 session, Daniels' plan would clamp down on local spending, give voters a say on government construction projects and cap property-tax bills for owner-occupied homes at no more than 1 percent of their assessed values....That would reduce bills for an estimated 55 percent of all Hoosier homeowners.

Daniels said he wants to put the cap into the Indiana Constitution...."Our steps must be fair, far-reaching and final," the governor said in his brief speech....He also proposed a cap for residential property that is not owner occupied — including rental and vacation housing — of 2 percent of assessed value. He proposed a 3 percent cap on commercial and industrial property.

A few thoughts:

-It's odd to brag about trying to have the 9th-lowest property tax bills in the country. For one thing, one could argue that it's property tax rates that are the more relevant measure. More broadly, it's overall tax burdens and rates that are more important than any particular tax.

-Daniels' proposed caps are set at round but arbitrary levels-- arbitrary in the choice and arbitrary in distinguishing between homeowners vs. investment and vacation homes vs. industrial property. That said, caps of some sort would limit the shenanigans that have previously plagued the Indiana property tax system.

-It's a nice addition that local spending increases would be restricted. This has been a significant proportion of the current woes. This also presumably foreshadows Daniels' continued efforts to address perceived inefficiencies in local governance.

-The need to increase other taxes to compensate for lost property tax revenue illustrates a point often ignored by novice proponents of repealing the property tax altogether. If the government continues to spend so much money-- the true, underlying problem-- then we're merely shifting the burden from one set of activities to another. As bothersome as the property tax is-- ethically, practically, and politically-- one must make sure that the alternative will be an equitable and efficient improvement.