When the mine where my father worked ran out of coal, he considered several options.
He chose to relocate from Kentucky to Fort Wayne, which had two major benefits. It was large enough to offer many non-coal mining employment opportunities, and his sister and husband already lived here and were able to help his family adjust to their new surroundings.
He didn’t think once of the comparative tax rates, the impact on the cost of living, or the quality of life facilities advertised in Chambers of Commerce brochures.
Moving is a complicated decision involving a myriad of factors that are different for each potential migrant. It’s not the simple cause-and-effect decision that sociologists seem to like.
And here I am, my father’s son, who has lived off and on in Fort Wayne all these years, now happily retired and pursuing my goal of growing old shamefully. So personally, I don’t care one iota that Republicans in the General Assembly might consider the possibility of eliminating the state income tax. However, as someone on a steady income, it would be very important to me if they suggested an increase in any of the taxes that affect my cash flow, such as taxes. B. Property, sales or excise taxes.
It turns out that being a “taxpayer-friendly” state is also complicated, since it involves much more than telling the mostly conservative voters in a mostly conservative state that a particular tax is being considered.
Unless, of course, you are mistaken and think that the state is simply giving up the money now collected through income tax. It brought in about $8 billion last year, accounting for nearly 39% of the state’s total revenue. However much of that amount the state chooses to continue spending, it has to find the money elsewhere.
Will it raise property taxes after years of bragging about how much it cut them? Will it raise sales taxes, which are already at 7 cents on the dollar, not to mention local surcharges? Will it start charging for everything we now consider free? Will it be satisfied with the $1 billion a year it already collects in gambling taxes, or will it encourage us to make more stupid bets?
Republicans are proposing a two-year blue-ribbon panel to consider both eliminating the income tax and “the entire spectrum of taxation in the state of Indiana,” according to the proposal’s author, State Senator Travis Holdman, R-Markle. We can only hope they focus more on the latter than the former.
If they focus on getting rid of the income tax, they will find reasons to do so, confident that this will be the magical missing piece in the job attraction puzzle they have been trying to piece together for so long. They will be blind to the negative possibilities of levying other fees and taxes, each of which has unintended consequences, opportunity costs and a tendency to inhibit taxpayer behavior.
If they instead focus on “the full spectrum,” they could develop an overall tax structure that is fair, transparent, and adequate for the task of government, as well as diverse enough to meet two criteria: 1. It will not unduly burden one group of taxpayers and 2. survive a downturn in one or more economic sectors.
I think we have a pretty good mix of taxes right now, but I’m no expert so I won’t argue too heavily with an economist who says otherwise. It’s a matter worthy of healthy debate.
But one thing I do know, as one of the citizens who help fund state government: Any “big picture” look at taxation that doesn’t start with how much we spend and on what and why is a pointless endeavor. Where the money goes is at least as important as where it comes from
Leo Morris, columnist for The Indiana Policy Review, can be reached at [email protected]
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