Who Knows Where Tax Reform Will Lead?
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
I am going to go way out on a limb here and predict that mostly the effect is not going to be positive.
We already are reaping one effect of property tax reform as the state sales tax increased by 16 percent - from six cents to seven cents on the dollar.[[In-content Ad]]So that $999.95 Fender American Stratocaster you bought this week cost you $1,069.95 instead of the 1,059.95 it would have cost you last week.
The purpose of the sales tax increase was to offset lost revenue from property tax caps that will be fully in place by 2010.
Taxes will be capped at 1 percent of assessed valuation for residential property, 2 percent of assessed valuation for rental property and 3 percent of assessed valuation for business property.
State officials concede that the increase in sales tax won't come close to offsetting the loss of revenue anticipated from the 1-2-3 caps.
An analysis by the Indiana Association of Cities and Towns shows that some counties will fare better than others under the new plan.
Our county is supposed to fare quite well, potentially losing only $xxx,xxx. I am at a loss to understand why, with all the highly assessed lake property in our county, but at this point, all we can do is wait and see.
Other counties, like Elkhart, for example, will fare much worse, losing $x,xxx,xxx. Again, we'll see.
But regardless of what happens, I think there is an underlying, yet unaddressed problem here.
You see, proerty tax reform is nothing new in Indiana. It's something that's happened several times in my lifetime.
Problem is, when the legislature gives us property tax relief, they add taxes elsewhere, in non-property areas, to make up for the lost revenue.
Then, over time, property taxes rise again. But in the meantime, we're still stuck with the new taxes.
Think about it for a moment.
We now have a "market based" process in place for assessing property. (Of course, the assessment is nowhere near "market based" as I see it, but that's a whole diferent column.)
As it stands now, residential property and only be taxed at 1 percent of assessed valuation. So let's say that they don't get the Indiana Constitution amended to reflect that.
Let's say in five years they decide to up the cap to 1.5 percent. Do you suppose they would roll back the sales tax increase that went into effect this week?
I didn't think so.
And even if the caps become part of the Constitution, the property still has to be assessed. If your assessment rises, your property taxes rise.
What do you supposed will happen to these assessments over the years?
I guess my view is that none of this addresses the right problem. It is a problem that is obvious, yet perennially seems to elude elected officials.
Lawmakers, at all levels, always tend to come up with creative ways to collect more revenue.
What they really need to do is come up with creative ways to spend less.
The problem isn't that we don't pay enough taxes. The problem is that government spends too much.
That's why I liked a portion of a plan put forth by those who wanted to completely abolish property taxes in Indiana.
I wasn't in favor of the whole plant, but I loked the portion that called for capping government spending.
The plan called for a cap on government spending, limiting it by linking it to inflation and popuation growth.
It wasn't actually cutting government back. it was keeping government spending constant in real per capita terms.
That makes total sense to me, but there was none of that in the plan we got.
Regardless of how all this plays out in the coming years, I know one thing for sure.
Taxpayers are starting to get tapped out.
There's pretty impressive list of impressive list of taxes that Americans may pay, depending on where we live and our lifestyle.
Accounts receivable tax, building permit tax, capital gains tax, CDL license tax, cigarette tax, corporate income tax, court fines (indirect taxes), dog license tax, federal income tax, federal unemployment tax, fishing license tax, food license tax, fuel permit tax, gasoline tax, hunting license tax, inheritance tax, inventory tax, IRS interest and penalties (taxes on top of taxes), liquor tax, local income tax, luxury taxes, marriage license tax, Medicare tax, property tax, real estate tax, septic permit tax, service charges, Social Security tax, road usage taxes, sales taxes, recreational vehicle tax, road tolls, school tax, state income tax, state unemployment tax, telephone federal excise tax, telephone federal universal service fee tax, telephone federal, state and, local surcharge taxes, telephone minimum usage surcharge tax, telephone recurring and non-recurring charges tax, telephone state and local tax, traffic fines (indirect taxation), trailer registration tax, utility taxes, vehicle license registration tax, vehicle sales tax and doc fees, watercraft registration tax, well permit tax, workers compensation tax.
It's to the point where, if you add up all the taxes, licenses, fees, etc. that you pay, I'd be willing to be almost half of my income goes to some sort of tax.
I think very soon, government entities are going to have to figure out ways to do more with less, just like all us taxpayers have to do.
I am going to go way out on a limb here and predict that mostly the effect is not going to be positive.
We already are reaping one effect of property tax reform as the state sales tax increased by 16 percent - from six cents to seven cents on the dollar.[[In-content Ad]]So that $999.95 Fender American Stratocaster you bought this week cost you $1,069.95 instead of the 1,059.95 it would have cost you last week.
The purpose of the sales tax increase was to offset lost revenue from property tax caps that will be fully in place by 2010.
Taxes will be capped at 1 percent of assessed valuation for residential property, 2 percent of assessed valuation for rental property and 3 percent of assessed valuation for business property.
State officials concede that the increase in sales tax won't come close to offsetting the loss of revenue anticipated from the 1-2-3 caps.
An analysis by the Indiana Association of Cities and Towns shows that some counties will fare better than others under the new plan.
Our county is supposed to fare quite well, potentially losing only $xxx,xxx. I am at a loss to understand why, with all the highly assessed lake property in our county, but at this point, all we can do is wait and see.
Other counties, like Elkhart, for example, will fare much worse, losing $x,xxx,xxx. Again, we'll see.
But regardless of what happens, I think there is an underlying, yet unaddressed problem here.
You see, proerty tax reform is nothing new in Indiana. It's something that's happened several times in my lifetime.
Problem is, when the legislature gives us property tax relief, they add taxes elsewhere, in non-property areas, to make up for the lost revenue.
Then, over time, property taxes rise again. But in the meantime, we're still stuck with the new taxes.
Think about it for a moment.
We now have a "market based" process in place for assessing property. (Of course, the assessment is nowhere near "market based" as I see it, but that's a whole diferent column.)
As it stands now, residential property and only be taxed at 1 percent of assessed valuation. So let's say that they don't get the Indiana Constitution amended to reflect that.
Let's say in five years they decide to up the cap to 1.5 percent. Do you suppose they would roll back the sales tax increase that went into effect this week?
I didn't think so.
And even if the caps become part of the Constitution, the property still has to be assessed. If your assessment rises, your property taxes rise.
What do you supposed will happen to these assessments over the years?
I guess my view is that none of this addresses the right problem. It is a problem that is obvious, yet perennially seems to elude elected officials.
Lawmakers, at all levels, always tend to come up with creative ways to collect more revenue.
What they really need to do is come up with creative ways to spend less.
The problem isn't that we don't pay enough taxes. The problem is that government spends too much.
That's why I liked a portion of a plan put forth by those who wanted to completely abolish property taxes in Indiana.
I wasn't in favor of the whole plant, but I loked the portion that called for capping government spending.
The plan called for a cap on government spending, limiting it by linking it to inflation and popuation growth.
It wasn't actually cutting government back. it was keeping government spending constant in real per capita terms.
That makes total sense to me, but there was none of that in the plan we got.
Regardless of how all this plays out in the coming years, I know one thing for sure.
Taxpayers are starting to get tapped out.
There's pretty impressive list of impressive list of taxes that Americans may pay, depending on where we live and our lifestyle.
Accounts receivable tax, building permit tax, capital gains tax, CDL license tax, cigarette tax, corporate income tax, court fines (indirect taxes), dog license tax, federal income tax, federal unemployment tax, fishing license tax, food license tax, fuel permit tax, gasoline tax, hunting license tax, inheritance tax, inventory tax, IRS interest and penalties (taxes on top of taxes), liquor tax, local income tax, luxury taxes, marriage license tax, Medicare tax, property tax, real estate tax, septic permit tax, service charges, Social Security tax, road usage taxes, sales taxes, recreational vehicle tax, road tolls, school tax, state income tax, state unemployment tax, telephone federal excise tax, telephone federal universal service fee tax, telephone federal, state and, local surcharge taxes, telephone minimum usage surcharge tax, telephone recurring and non-recurring charges tax, telephone state and local tax, traffic fines (indirect taxation), trailer registration tax, utility taxes, vehicle license registration tax, vehicle sales tax and doc fees, watercraft registration tax, well permit tax, workers compensation tax.
It's to the point where, if you add up all the taxes, licenses, fees, etc. that you pay, I'd be willing to be almost half of my income goes to some sort of tax.
I think very soon, government entities are going to have to figure out ways to do more with less, just like all us taxpayers have to do.
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