Anybody who has read my column more than a couple of times knows I am for lower taxes and smaller, more efficient government.
I think, generally, that government - especially at the federal level - is way too intrusive and spends way too much money.
So it may come as a surprise to some of my loyal readers - all seven of them - that I think amending the state constitution to add property tax caps is a bad idea.
Now, I won't say I'm against property tax caps in general, but amending the state constitution seems a bit much.
Without going into a long history of the property tax woes Indiana has endured, let me just say that a court ruled the way we assessed property was wrong.
Then, when the property was assessed right, lots of people's taxes went way up. This, of course, made lawmakers' phones ring off the hook.
So to mollify us, lawmakers in spring 2008 passed tax relief. As part of the package of tax relief - which, by the way included a 16 percent increase in the sales tax - property taxes were capped.
When the plan is fully implemented this year, property 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.
I don't think that's a bad thing. I don't think property tax relief - given the set of circumstances faced by the state at the time - was wrongheaded.
But also, as part of the plan, the legislature began the process of amending the state constitution to make the caps permanent.
And that law is on a fast track right now in the Indiana legislature. It's almost sure to pass and it will be on the ballot this fall during the general election.
Now, if a voter sees a "Yes" hole to punch under question that says something like, "Do you think property taxes should be capped in Indiana?" what do you supposed will happen?
Oh yeah. It will pass.
And even though there seems to be a certain inevitability about all this, I can't resist laying out why I'm not a fan.
Mainly, it's because of who ends up suffering. It's the local taxing units that suffer, which, ostensibly, is everybody.
Of course, people don't want to pay higher property taxes. But those same people don't want roads full of potholes, substandard schools and inadequate ambulance, fire and police services.
And while I am a huge proponent of leaning down government entities and making them more efficient, starving them isn't the answer either.
Take, for example, the things that drive up property taxes. Sure, it's spending by the local taxing unit. But what drives up that spending? Things like health care and fuel. Those costs can't be controlled by local government.
And the rules of supply and demand also apply to government services. If more people move here, we will need more services. Schools can't shut their doors to new students.
So what usually happens is local taxing units shift their revenue bases to other local sources, like local sales taxes, income taxes and fees.
This can help them maintain existing levels of services, but it places greater tax burdens on low-income residents.
Let's say a library card costs $20 a year in a certain taxing unit and the library, strapped for funds, raises that cost to $60.
For someone making $100,000 a year, that's not a big deal. But for a single mom making $24,000 a year?
Same with a 1 percent local option income tax increase. The $100K guy, not that big a deal. The single mom, big deal.
It's regressive.The caps also tend to shift tax burdens to lessors and renters because their property bills fall outside limits set by the caps. Again, more of a burden on lower-income people.
So when taxing units attempt to make up lost revenue, people suffer.
Sometimes increased state aid can help make up lost revenue, but that's generally not reliable over long periods - and especially unreliable during economic downturns.
The bottom line in all this is that when local taxing units fall short of revenue because of property tax cuts, they cut services. There are some pretty straight-forward examples of this.
Take Massachusetts.
In 2005 The Municipal Finance Task Force published a report, "Local Communities At Risk: Revisiting the Fiscal Partnership Between the Commonwealth and Cities and Towns."
It showed that some Massachusetts towns laid off school and town employees, laid off cops and firefighters, froze wages, closed senior centers, closed libraries and stopped funding road and sewer projects to comply with the state's property tax cap.
Linda Dawson's 2001 report, "Feeling the impact of tax caps" in the Illinois School Board Journal, notes that school districts affected by that state's cap have eliminated positions, reduced the number of teaching assistants, imposed salary freezes, and cut certain classes.
Things like this play out in negative ways in the affected communities - higher drop-out rates, less qualified teachers, lower test scores and a general decline of services and improvements. This, of course, disproportionately impacts lower-income people - the people who need services the most.
This column is getting a little long and we haven't even touched on and the problems property tax caps raise with regard to constitutionally mandated "fair and equitable" taxation.
Maybe we'll look at that next week.
As I said earlier, leaner more efficient government, good. Property tax caps - give a certain set of economic circumstances - good.
But making property tax caps part of the state's constitution, which would make repealing the caps virtually impossible - not so good.
Besides, taxation is a hugely complex issue and I think we should be treading lightly. Instead, we appear to be tromping headlong into the abyss.
