Indiana Political Review

I recently attended a block party/Euchre tournament (in which I got trounced in trying to defend my previous year’s champion status). Much beer was consumed and, as often happens in these situations, the subject of politics was raised between the late-stayers (read: most inebriated). The subject was property taxes and I was pitted against a mid-level Peterson administration functionary.  I suppose I should say at the outset that this conversation was the continuation of an email exchange which occurred on our neighborhood network, whereby I guess I tweaked this person’s ire. After we were introduced, he put two and two together and deduced that I was the guy with which he had disagreed. The argument was on. He was game and, as we might suspect, I was game. The previous email exchange included the charge against me that I didn’t understand the full complexities of the problem that our keepers (my word) faced regarding the tax situation. I agreed that the situation was complex and I have said on this blog that I do not believe that the Peterson administration is solely responsible for the tax situation that has so exercised the populace. Indeed, as I look back over my previous posts (and emails to my interlocutor), I see that I place a majority of the blame on school boards. After much back and forth, incriminations and explanations, my interlocutor and I arrived at an understanding that I truly believed such to be the case.  

I won’t bore you with all the back-and-forth, but suffice to say that the organization that commands more than half of the funds collected through the property tax is the one that we probably ought to focus on for a solution. However, as I told my interlocutor, this is an impossible thing. Imagine this: There is a candidate for school board. She promises to cut spending in every category of education by 20%. Ask yourself this question: Who would possibly vote for her? I don’t even know if I would vote for her if that were her platform. And, I have a fairly clear view of what the problem is. It is impossible to imagine that anyone who even hinted that they might cut funding for education would ever stand a chance to be elected to the school board. And yet, that is the source of most of the tax increase that has been suffered by property owners recently. This is the overriding problem in addressing the property tax dilemma. 

I’m a little peeved that I’ve already used the blog heading, “Why can’t we leave a child behind,” because this leads to one of the ways the education budget could be limited. We spend an inordinate amount of money attempting to educate people who honestly cannot or will not be educated. The first falls under the heading of “special needs” education. There are some people who, no matter how long or sincerely or expensively you work with them, they will never achieve anything better than a rudimentary education. We need to ask ourselves if it’s truly worth the amount of expenditures we commit to this sort of education to continue such a practice. There is such a thing as futility. And, we ought not to spend money on things which are futile. 

Special needs education is not the only sort of spending we persist in which, in the end, is futile. When a person drops out of school or when a person persists in being a chronic troublemaker, schools ought to have the authority to let them go, cut their losses and move on. A person who has no desire to learn and who actively resists any efforts to educate him will never learn until he makes the decision to commit himself to it. No amount of money spent on computers, Bunsen burners or after school programs is going to entice such a person to make the needed commitment. There must be an initial desire that money cannot create. However, promising to provide for these two types of students is how one gets elected to the school board. If someone who held my views ran for school board, they wouldn’t stand a snowball’s chance. And, so, school budgets will continue to spiral ever upward with no prospect of ever being checked – let alone reversed.  

The only solution I see is to impose external restraints on the school board regarding the amount of increase they are authorized to impose. This needs to be an issue which is debated apart from any school board election, and even then, the demagoguery will be astounding. Only through putting some sort of ceiling on the school board’s discretion will we ever be able to rein in the property tax crisis. 

Which leads me to another issue… 

While I was having this discussion with my interlocutor, another late-staying Euchre player who’d had plenty of spiritous encouragement kept interjecting into the conversation that the only way to solve the problem is to enact a consumption tax. I will be frank. I am sick of these idiots who believe that a consumption tax will solve any problem. It will not. And, indeed, it will exacerbate most problems. As much as I despise the property tax and think that it is morally reprehensible, I can find no alternative which is preferable. The key, to me, is to find ways to limit our exposure to property tax increases.  

A consumption tax will cause goods to arrive in the Indiana market at a price significantly higher than those in neighboring states. To illustrate this, imagine that you live in Terre Haute and the sales tax in Indiana is increased to 12%. It might just be worth it to you to drive the 20 or so miles to Illinois (where the sales tax is only 6%) to buy all of your goods. Many people will say that Terre Haute is close to Illinois, and of course people there may opt to do what you propose. But, that wouldn’t happen in Indianapolis, at the very center of the state. It’s just too far to drive for such a small benefit. I respond by pointing out that, to an extent, this is correct, but it is only a question of the percentage. Raise the percentage high enough and even people from the remotest (most interior) portions of the state will make a run for the border to buy consumer goods. What’s worse is that the more people who live in border communities who opt to shop in other states, the higher the sales tax must be to overcome their defection, which in turn will encourage people further in to defect, which in turn will prompt a higher sales tax, which in turn…you see the problem. 

I believe a consumption tax would destroy the Indiana economy unless our neighbors went with us too. It’s sort of the old détente theory of national security:  

“I’d love to reduce the number of missiles I have aimed at you, but you seem to have a lot aimed at me so I can’t, in good conscience, do that until after you do.”          

“Well, I too would love to decommission most of my missiles, but the threat that your missiles present prevent me from doing so. So, unless you first drop your defenses, I am bound to keep mine up.”  

…is transformed into…

“I’d love to raise my consumption tax, but if I do, a lot of the people who live in my state will simply cross the border and buy goods in your state.” 

“Well, of course the same would happen if I did. And, if I don’t follow your state and raise my sales tax, I would derive the benefit of your state raising a large consumption tax since your citizens would buy more goods here.” 

“But, if we both did it together, then maybe it might work.” 

“True, but the other possibility is that we would only redirect the flow of outgoing traffic to other states that border our two states and we would both lose. No. Unless all the states that border mine agree, I can’t, in good conscience, raise my taxes first. You should probably call Michigan. They already have confiscatory tax rates and no business investment. Plus, Jennifer Granholm is clueless about fiscal policy. She might go for it. I encourage the two of you to try it. If it works in your states, I promise we’ll do it here too afterwards.”