Franke: Property-Tax Misery
by Mark Franke
Sometimes, things just don’t make sense.
The news has been full of stories of local government taxing districts unhappy with Gov. Mike Braun’s proposal to reduce property taxes for Hoosiers. It seems these units will find it stressful to operate with a reduction in tax revenue, regardless how small.
That’s standard operating procedure. No governmental unit will ever gladly embrace a reduction in revenue any more than a family will be happy with a reduction in its income. It is human nature, including the natures of those humans who head up governmental agencies, to lock into an income stream and the expenditure level that it supports. No one expects it to ever decrease.
The nonsensible part of the property-tax bewailing is that it does not jive with what we taxpayers have experienced. Everyone with whom I talked, and I do mean everyone, complained about large increases in their annual-property tax bill. Some of the percentage increases were so high that I assumed they were exaggerations. Then I calculated what has happened to my own property tax bill.
In the five years beginning in 2020, my net property-tax payment increased by 52 percent. That that’s a huge number even with inflation. To put it into perspective, my Social Security benefit increased 26 percent over the same period. At the same time, our employer pensions have remained flat for 12 years with no annual adjustments, the very definition of living on a fixed income. The net effect was that my wife and I had to cut back on some other discretionary expenditures to satisfy the tax collector.
Other than Governor Braun, I don’t think anyone in Indianapolis gets it. The Senate Republicans are patting themselves on the back for “cutting” the proposed increase in property tax bills but only a governmental type could call it that with a straight face. I don’t single these senators out as exceptions to the norm; the politicians in Washington have made careers out of proposing huge increases in spending and then reducing the increase slightly and bragging about their fiscal responsibility back home. Only in government does a “cut” just mean a smaller increase.
Am I the only one getting tired of being told to tighten my belt because the government won’t?
Farmers are even more unhappy than homeowners. Property taxes on farm ground have increased by 48 percent in just one year for a famer friend in Allen County. His township has a new fire district levy that accounted for about one-half of the increase, so I reviewed the increases in all Allen County rural townships and found consistent rises well above the rate of inflation. The increases for Allen’s most productive agricultural townships ranged from 28 percent to 76 percent, according to a document posted on the Allen County website.
But why should the rate of inflation factor into this? Inflation is hitting these same homeowners and farmers across all their expenditures. Inflation is the cruelest tax of all, as I learned in my first economics class. The nasty thing about inflation is that it invariably affects prices before incomes can catch up. Family budgets go out of balance with the only options being to stop buying something or to go further into debt.
Recall the debt-ridden Mr. Micawber’s advice to the young David Copperfield in the Dickens novel: “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” The balance between financial happiness and financial misery is a fine one.
There are property-tax caps of one percent for homeowners and two percent for farmers but these don’t stop increases in our net bills. The secret ingredient in the state taxing recipe is the assessed valuations of our property. If they go up, for legitimate real estate market changes or just due to inflation, our tax bill will go up as that one percent is calculated on a higher base. Not that increased valuations, no matter how realistic, help us settle our tax bill with the county treasurer. No additional income comes in from these paper gains but more real outgo goes out with our tax payment. Heads I win, tails you lose.
The underlying principle is: Whose money is it? Is it a benevolent government that generously allows us to keep some declining percentage of our income for personal use? Or are we as a free people voluntarily paying reasonable taxes to fund common services best provided collectively by the government?
The Founding Fathers used a rallying cry of “No taxation without representation” to justify their war for independence. I don’t think we independent Americans today are any happier about taxation with representation.
Mark Franke, M.B.A., an adjunct scholar of the Indiana Policy Review and its book reviewer, is formerly an associate vice-chancellor at Indiana University-Purdue University Fort Wayne.
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