Wednesday, November 14, 2007

Marcus on fiscal reform-- over and above property tax reform

Some great policy ideas from Morton Marcus in the Martinsville Reporter-Times (hat tip: Jeff/NA News-Tribune)...

With the elections just past and the property tax issue getting so much press, Marcus opens by saying "it's time to drag out some previous suggestions for fiscal reforms".

First, it's time to reconsider property tax abatement. But we can't understand property taxes and their abatement if we don't understand assessment practices. And, it is not clear what is happening these days with property assessment....

Second, some portion of every sales tax dollar should be returned to the taxing district in which that dollar was raised to support local services. This should not be a mandated replacement of property taxes, but a new source of funding used at the discretion of local officials....

Third, let's stop unfair subsidies to seniors. Why should a person get a $1,000 exemption on his/her income tax just because s/he is over 65? Why is a rich person of age 66 given a benefit denied to a poor person age 64? Income taxes should be based on income, not age....

Fourth, get rid of preferential treatment for homeowners. Property taxes are levied on land, buildings and other improvements. Whether that site and structure are used as a house or a bakery is of no consequence for property tax policy.

Fifth, let's give larger individual exemptions to make our income tax more progressive. Right now we provide a $1,000 exemption per person (plus an added $1,500 for children). Raise that to $5,000 per person so that a family of four with an adjusted gross income of $20,000 would pay no Indiana income tax.

Sixth, stop blind budgeting. Let's have localities budget on the basis of actual revenues received rather than on the thin air of revenue expectations. Today your city or town makes up a budget and submits it to DLGF long before revenues are known. Then DLGF certifies a property tax rate for each locality. Later the Office of Management and Budget figures out how much local income tax is returned to your county.

By this time, schools, counties, cities, towns, libraries and other local entities are already spending the money they have yet to see. Wouldn't it make more sense to have these governmental units spending from money they actually know they have?

Seventh, local revenue sharing is very important. If a new factory moves into one school corporation, how are the property taxes to be distributed among the surrounding schools where the workers may reside?...

Apparently, Dr. Marcus has more ideas! He concludes with:

There are many other reforms to consider, but I have run out of space and you might have run out of time.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home