Indiana Political Review

Sorry for the TRIPLE POST! Ouch, I’ve been out of commission too long. (And, what’s worse is I’ve got two more posts in mind, but we’ll save those for the time being).

I’m looking back over some of the drafts of potential posts that were never posted and I ran across this little gem which was written last August. In it I was going to say:

Peterson has promised 200 new police officers, but with the consolidation, the last budget actually cut the number of officers by 77. The 11% increase [proposed by Peterson at that time], if spent entirely on new officers would fund about 45 officers, leaving 232 to go before Peterson could declare “promise delivered.”

Perhaps Birdy can help me out on this, but it seems that Peterson has never delivered on his original promise. Even with an 11% increase in public safety spending last year, we are still far short of realizing the promises that Peterson has been spouting for some time. Now we are saddled with a 65% increase in our county income taxes, who wants to bet that we will see Peterson’s original promise fulfilled finally? Perhaps we should wait until he raises our taxes another 80 or 90% before we really take him to task.

Perhaps not.

Before I begin, let me apologize for the double post. I have been bottled up in the bar exam for two days and have been raring to go on these two stories for that entire time.  

On Tuesday, the City-County Council voted to raise the county income tax 65%. The vote was 15-13 in favor of the proposal which was requested by Mayor Bart Peterson in order to increase “public safety”. As a matter of housekeeping before I launch into a screed against this, I should note that 13 of the pro votes came from Democrats on the Council (the two “Republicans” were Scott Keller and Lance Langsford - remember them in the next election for City Council) and 11 Republicans voted against the measure (the two Democrats were Sherron Franklin and Dane Mahern - remember them or not in the next election).

 As I mentioned before, the tax hike was spurred by the need for increased funding for public safety according to the mayor. However, I seem to remember that Mr. Peterson stated that the consolidation of the Indianapolis Police Department with the Marion County Sheriff would result in significant savings to the taxpayer. This was the primary reason (supposedly) that Mayor Peterson was pushing the consolidation. All of which leads one to ask: Why don’t we apply all those savings to the increased need for public safety? The answer, of course, is that there were no savings. In fact, it would seem that the city has incurred additional costs as a result of the consolidation. We have been socked by a 65% increase in our local income tax to pay for it.

Of course, this leads to three questions:

1. Was Mayor Bart Peterson mistaken about the effect of his ill-planned scheme?;
2. Was Mayor Bart Peterson lying about the savings in order to get the consolidation approved?; Or,
3. Was Mayor Bart Peterson right about the savings that could be realized, but he bungled the consolidation so as to waste the benefit?

It seems to me the best one could say of Mayor Peterson was that he was mistaken about the benefits that would accrue to the city. However, if that is so, should we trust his judgment in other things? It seems to me that if the best thing we can say about Mayor Peterson is that he doesn’t know the natural consequences of his decisions, that we should probably consider some other person as mayor of Indianapolis. The other conclusions are worse.

There are two stories in the Star that I think merit some comment, here and here. The basic gist of both is that Governor Daniels has come to the obvious conclusion that the commercial property in Marion, Delware, Posey and Gibson counties were not assessed for the latest round of property tax assessments.

In Marion County (and apparently the other three counties), commerical/ industrial property was not reassessed. As a result, it is likely currently assessed quite a bit lower than its true value. What the Governor will accomplish here is to ensure that no matter what type of property one holds in these counties, it will be taxed equitably. Keep in mind that the same amount of money is going to be collected no matter what the outcome of the commercial property reassessment. If, in aggregate, the commercial property assesses at a higher value, then holders of commercial property will pay more of the fixed tax bill and homeowners will pay less. That is the most likely outcome. In the end, the tax burden will be shared more equitably than is the case now. There is no reason that a home should be paying roughly the same amount of tax as a Kroger Supermarket next door (as has happened in one neighborhood in Indianapolis). But, in these counties, because commercial property has not been accurately assessed, examples like these have happened. Think about it. You cannot purchase a Kroger Supermarket for the same (or less) as the house which is located next door. Likewise, no one should expect that the taxes on the two properties should be even close to the same.

Some people are upset that the response by Governor Daniels (so far) only addresses the problems in the four counties listed. Please remember, that his response will not change the tax bill so that other counties (outside of these four will pay more in taxes), it will only reallocate it among the property owners in the four counties that a reassessment has been ordered for. This will have NO EFFECT on other counties.

You are probably still being screwed in your county, but the problem is not with Marion County or the other three and what reshuffling of the tax burden in Marion County occurs is entirely beside the point with respect to your tax bill, if you live in another county. Your beef is with your local government and their spending habits.(You may also have the same problem as Marion County in that assessments on all property were not completed – you should probably find out).

But, how will a reassessment of commercial properties help those in the counties affected? Let’s use a grossly oversimplified example to show why (Since this next involves math, I know Birdy is cringing, but stick with me, it’s really simple math). Suppose there is a hypothetical county with one residential property and one commercial property. Each are assessed at $100. The government determines (through its budgeting procedures that it requires $6 to provide the services it has committed itself to. What then happens is it looks at the total amount of property in the county, in this case $200 worth and determines the tax rate. In our example case, the rate would be 3% (3% of $200 =$6). Therefore, in this example, the homeowner pays $3 and the commercial property owner pays $3.

Now let us suppose that the commercial property is really underassessed. Its true value is $200. Meanwhile the residential property is properly assessed at $100. Now, the government looks and finds that there is $300 worth of assessed property in its county. They still need $6 (that bit doesn’t change), but to get there, they need only impose a tax rate of 2% (2% of $300 =$6). Therefore, the homeowner pays $2 (2% OF $100) and the commercial property owner pays $4 (2% OF $200). The division is more equitable because each property owner is now paying for a share of the taxes relative to the value of the property he owns.

Of course, none of this addresses whether it was legitimate in the first place for the government to demand $6. Six dollars in this case, may be exorbitant (especially if start putting words like “million” after $6). But, the example shows how reassessing property can result in lower taxes for homeowners.

In the end, the problem is government spending. It is out of control. This response from Gov. Daniels will only reallocate the burden of the tax bill. We are still being taxed too much and this does not address that problem. That problem will have to be addressed in the next election. Stay angry until November; resolve the issue then. In the meantime, allow the Governor to address the short-term problem of the allocation of the tax burden in these counties. The work that the governor is doing is helpful, if not conclusory with respect to the overall problem.

 Kudos to Governor Daniels for stepping up and beginning to deal with this problem…now, if only he can get the legislature and city council to rein in spending…

from Pat Buchanan. Via Chronicles: http://www.chroniclesmagazine.org/?p=215

As usual, of particular interest are the comments after the article.

I wanted, first, to introduce myself. Hi. I’m a friend of Karl’s. You can call me Birdy. Second, I want to let you know I’ll be posting here from time to time. (Excuse me while I scrape and grovel before Karl for a sec. Okay, I’m back.) He apparently thinks I’ll have some thought-provoking stuff for our vast readership, and for that I’m grateful.

Now, full disclosure: I’m a paleocon. A real one. Somewhat agrarian. Almost always obstreperous. I won’t pretend I’ve mastered the virtues, but I will try to remain civil while pounding your head.

Alright, the topic du jour is taxation, particularly property taxation, what can be done about it, etc. Here’s my proposal: Amend the Indiana Constitution to repeal Article 8. You read that right. Not section 8 of article 8, tempting as it might be to never have to see Dr. Suellen Reed on television again, but the whole damned article. “Common Schools,” such as we have here in Indiana, no longer (giving them the benefit of the doubt that they ever did) provide the education necessary to the “preservation of a free government.” And can anyone actually say that they are the beneficiaries of sufficient “moral, intellectual, scientific, and agricultural improvement” thanks to their public education in the Common Schools? I would like to say I know what the Congressional Township fund consists of these days, and even that I know what the Saline fund is, much less how much is in it. But, alas, my public education didn’t do a very good job of preparing me for the task of preserving this aspect of a free government, much less a free government in its entirety. (And what did they mean by “free government?” Isn’t that quintessentially oxymoronic?)

So. By all means, let the haters rail. Let the debate begin. Let discourse occur, for this is precisely what John Dewey’s creation has prevented all these years. I know I’m not the first to have said this, but the system is rigged to perpetuate itself. To create more denizens of Belloc’s “Servile State.” George Bernard Shaw, whom you are never likely to see me quote again, said “the government which robs Peter to pay Paul can always count on the support of Paul.” The problem, folks, is that we’ve become both Peter and Paul.

What’s the alternative, you ask? Good question. And its answer is manifold, since it would be entirely too messy to engage in the “reeducation” of ACLU types and the judges who listen to them. We could simply stop taxing ourselves for a service we’re not getting and spend the money on tuition for private education. There are several options: Catholic parochial schools, Protestant ones, Montessori schools, non-affiliated private schools, home schools… the list is short but distinguished. Far more distinguished than P.S. 47, Consolidated County Central TWP High, or what have you.

Don’t get me started on libraries. I have one word for you: Carnegie.

It’s called subsidiarity, people. Look into it.

I will be follwing up the recent post with actual content, I swear. However, I am studying for the bar exam which will be held this Tuesday and Wednesday. Thursday will likely be a wash since it is exceptionally likely that I will be severely hung-over. However, Friday I will make a commitment to getting this ball swinging. Of course, I said that last August…

With the recent uproar over property taxes, it seemed that it would be a good idea to revisit the idea of launching this blog. For next several weeks I will be researching property taxes - how they work, who has the power to levy on my property, etc. During that period, I will report regularly on what I find.

 I should note at the outset: I am not an expert in the property tax. In fact, more than one person has told me (usually when I have offered my opinion as to what needs to be done) that normally, ordinary humans are incapable of understanding the complexities that make up Indiana’s property taxing system. However, it is apparently not a problem if you are a low-level functionary in the Peterson administration since some of the most condescending of those sorts of comments comes from one such person. All I know is that without actually knowing the hows and whens of property taxation, I feel like I get the general gist of things when I write the check to pay them.

What I have found so far is that it is nearly impossible to determine who has the power to levy on your property. I understand that there are somewhere in the neighborhood of 45 (according to Bart Peterson) to 62 (according to Abdul Hakim Shabazz) different taxing units that have the power to levy on your property. The exact number probably depends on what taxing district you live in. Good luck finding a list of them. That is one of the things I am going to try to uncover.

What I do know is that some of these taxing units are elected and some of them are appointed. For the life of me I cannot understand how an appointed official should ever get the authority to demand money from me when I did not elect them. It seems like a sort of taxation without representation to me. And, I thought we as Americans objected to that sort of thing. Maybe I’m mistaken, but didn’t we fight a major war against the most powerful nation on earth (at the time) over this issue? Could be me; I went to public schools.

I can’t promise that any of this will be interesting, but it should be informative. And it might even make some of you angry. Some at me. Some at our government. It sort of depends on your viewpoint as to which camp you’ll fall into.

 Initial Proposal

I’ve alluded to it above, but what exactly do I think ought to be done about property taxes? I’ll simply reiterate that I’m no expert and this plan may turn out to be fluid as we learn more, but…

I think the major problem with property taxes is that there’s no accountability. There is no single authority who can say, “Stop. No more taxes.” As a result you have somewhere between 45 and 62 (maybe more) individual taxing units that each have the authority to levy on your property to a greater or lesser extent. The only limit that appears to be on the amount of the tax is the amount of budget that these folks think they can get away with without bringing heat upon themselves. It is for this reason, this lack of limitation on the upper end of taxation, that I don’t think replacing the property tax with a sales tax, or an income tax, or the Fair Tax is the answer. It is simply too easy for politicians to change the rates of each of those just mentioned taxes.

Instead, what I advocate is to think of the whole situation the other way around. Instead of allowing the government to determine how much they want and then to place the burden on the taxpayer to come up with the money, we should tell the government how much they have to spend and let them decide how to allocate what they have. If they need more, they should have to come back to the taxpayer, hat in hand, on bended knee asking us if we could find it in our hearts to maybe give them a little more for their real swell project, pretty please. The matter would go to a statewide ballot initiative and the taxpayers would vote to determine whether the government has made a compelling enough case to part with a larger amount of our money.

I think the way to do this is to put a cap on the property tax, say 1% of the assessed value of the property. Further, the assessed value must be tied to real-life market values (based on comparables in the same neighborhood, for instance) so as to prevent the assessor from simply inflating the assessments to get around the caps. In order for the government to deviate from the cap level, they would have to make a case to the people of Indiana to adopt the measure in a statewide ballot.

Setting the government’s salary, so to speak, would force them to evaluate each and every expenditure to make sure it is in the best interests of the State of Indiana. In addition to the restraint that such a system would impose on the taxing authorities of this state, this system would promote the predictability of future tax bills. I was hit with a 62% increase during the last few weeks (on top of the 100% increase 4 years ago, that equates overall to a 224% increase from what I was paying just four years ago). I want to be sure that I won’t have to eat another 62% (or worse) next year or the year after that. This system ensures it. The predictability in turn will promote stability in property prices and may even increase the value of homes when buyers can safely project their costs into the future instead of having to discount today’s price in the face of unknowable tax increases in the future. If property values are enhanced, assessed values will increase and the government will enjoy more revenue. Everyone wins in the end.

The current system leads to a Detroit-style Urban Death Spiral, which sort of sounds like a cool amusement park ride, but trust me, it’s not a ride you want to be on.