Property Taxes: Try to Reform or Hope to Repeal?

February 18, 2008

For release Feb. 20 and thereafter (620 words)

by Eric Schansberg, Ph.D.

Recently I had breakfast with two prominent advocates for Eric Miller’s plan to repeal property taxes. They were interested to learn about some deficiencies with the plan and their consultant’s report on the plan. That same day we traveled to Salem for a public forum sponsored by the Chamber of Commerce and Farm Bureau in Washington County hosted by Sen. Brent Steele and Rep. Dennie Oxley.

With a front-row seat to see Indiana’s frustration with property taxes and the opportunity to hear legislators speak about the Daniels and Miller plans, I learned a lot that day. So, here are some further reflections on property taxes and the efforts to reform or repeal them. Let’s start with the Daniels plan.

Given these problems, what about the Miller plan to repeal property taxes? Shouldn’t we just take the property tax behind the barn and shoot it? Perhaps. But there are also significant problems with the current version of the Miller plan. (At least for now, the point is moot, since the repeal of property taxes has been sent to a “summer study committee.”)

The funny thing is that economists view property taxes as a relatively attractive way to raise revenues — at least on paper. They are a relatively stable revenue source compared to income and sales taxes. Their elimination would result in higher rates on a narrower base — not a good thing. And property taxes should provide more local control than state income and sales taxes.

But again that’s just on paper. Indiana’s last 35 years with property taxes have been a growing disaster. It’s not clear what would improve the mess.Interestingly, a slower economy may be a problem for both plans. It makes Daniels’ spending cuts more painful and Miller’s revenue projections even dicier. In any case, it’s not clear that the Daniels plan will put an end to the nightmare — and at least for now, it’s not clear that the Miller plan is the ideal alternative.

Eric Schansberg is professor of economics at Indiana University Southeast and an adjunct scholar for the Indiana Policy Review. He is the author of "Turn Neither to the Right nor to the Left: A Thinking Christian’s Guide to Politics and Public Policy" and the editor of SchansBlog.com. Nothing written here is to be construed as reflecting the views of the Indiana Policy Review Foundation or as an attempt to aid or hinder the passage of any bill before the legislature or to further any political campaign.



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