Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Previewing the Long-Term Effects of TariffsThe dominant effect of the Trump tariffs will be to raise production costs on almost every American manufacturing firm.

It’s TDS to Suppose These Tariffs Are WorkingTrump has pushed the U.S. into an economic downturn that will be especially hurtful to Hoosiers.

Trump’s Tariff Recession Is HereMy new forecast, completed in late April, predicts a national recession began as early as March in reaction to Trump’s tarriffs.

Two Key Economic Lessons in One BillHoosiers face trade-offs and opportunity costs in the wake of SEA1.

View archives

Top Tags

jobs and employment 262
economics 203
state and local government 188
education 186
indiana 173
economic development 171
taxes 146
budget and spending 145
law and public policy 144
workforce and human capital 139
Browse all tags
Reporter / Admin Login

March 24, 2008

Process Produced First-rate Property Tax Reform

The practice of economics can certainly compel a man to cynicism.  Take for example tax reform.  I’ve testified on tax reform before legislatures in three states and one foreign country.  Each had much bigger tax problems than does Indiana. Today, in each of those places several solid proposals languish under the assault of special interests, much to the chagrin of taxpayers.    

Here in Indiana, the story is different. 

The past few months have seen reasoned and informed debate on property taxes.  To be sure there has been a bit of pure politics, but nothing that derailed the efforts.  It is enough to embarrass even the most the self indulgent cynic.  

The property tax changes the Governor and legislature have given us are truly first rate.  It caps residential rates at 1 percent, rentals at 2 percent and businesses at 3 percent, while raising sales tax rates by 1 percentage point.  This nets taxpayers about a $600 million tax cut.    

The costs of school operating expenses, child welfare and a few other costs are absorbed by the state.  Contrary to much recent wailing, this strengthens and protects school funding. The temporary exemptions on caps for some fast growing counties and short term relief for capital projects buffer the transition.   

Costs for local communities are slashed by more than $100 million through the elimination of assessors in all communities with fewer than 15,000 parcels.  Communities worried about loss of revenue can impose their own local option income taxes to cover shortfalls. 

Like all good compromises, the plan has something to which we all can object.  I would like to tax services (yes, lawyers, physicians and economists).  I would also like to see all assessors below the county level eliminated (the plan keeps the most egregiously costly ones for a county referendum). 

The plan is also kind to those most affected by the sales tax increase.  The roughly $275 per person annual increase in sales taxes is offset by an increase in the earned income tax credit.  This is one of the better tools to spur movement out of poverty and is well used here. 

By my estimates, this is also a jobs creation tax plan.  Removing the uncertainty surrounding property taxes and reducing the average tax rate combine to account for as much as 20,000 new jobs in the state.  That alone was worth the difficult effort poured into the plan. 

Most importantly, this legislation sets the stage for the more difficult task of reforming local government.  Local governments must now begin to convince voters (directly or indirectly) of the need for new income tax revenues.  This is the first step towards a truly modern (and by that I mean early 20th century) style of local government in Indiana.  The transparency that must ensue from this process is much needed, and should be welcomed by Hoosier taxpayers. 

In the end, this is a triumph of policy over politics.  Local policymakers seeking to make their communities more economically viable should be overjoyed, and the taxpayer triumphant. 

Link to this commentary: https://commentaries.cberdata.org/121/process-produced-first-rate-property-tax-reform

Tags: taxes


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close