Friday, March 14, 2008

Tax "reform", local politics, and other news

The state legislature just passed a bill which "reforms" the property tax system. Problem is, it doesn't actually change the total tax burden -- just shift it around a bit. And it shifts it towards the lower and middle classes, by trading property tax cuts for sales tax increases. Think about who gets hit harder by this, and who benefits. The poor? They mostly rent. The property tax cap for rental properties is double the cap for homeowners, and landlords will pass the tax along to their renters. And, poor people tend to spend all of their money; everything they spend, they lose 1% of to the sales tax increase. Middle-income families? They'll come close to breaking even. Their property tax is capped at 1% of their assessed value (with, I should mention, no agreed-upon standard for how this is defined). But they also pay the sales tax increase on all the money they spend, which is all or most of their money. The upper 2% comes out ahead on this deal, though. Not only are their property taxes capped like everyone else's, but they only pay the sales tax increase on the percent of their income they spend. No sales tax on money they invest or save. People who earn and spend money pay a sales tax increase; people who invest, who just have money, end up with a net savings from the tax "reform" plan.

And, the politicians acknowledge that it's not really a tax savings. Cuts in property tax revenue will force increases in local income taxes, which will nullify the property tax savings. And, the net effect will probably be an increased individual tax burden; businesses also had their property tax capped, but nobody's mentioning the possibility of increasing any business taxes. And, keep in mind that the current property tax fiasco was partially caused by the elimination of the business inventory tax. The loss of revenue from business taxes will be balanced by increased taxes on individuals. One state rep called the tax reform bill "the largest tax increase in the history of the state" (Rep. Craig Fry). Another acknowledged that the bill was passed largely so the bill's supporters could claim it as a political victory, and that the bill's shortcomings would come to light soon enough; "we all know we'll be back next year, fixing this all over again. I hope one of these years we can get this right" (Rep. Ryan Dvorak). My favorite lawmaker quote from this whole mess: "[this bill] is a skunk thrown into the legislature by Governor Daniels, now gussied up with some deodorant" (Sen. Lindel Hume). So much noise, but nothing really changed for those of us who pay taxes.

And, let's not forget that our old mayor was voted out of office primarily due to anger over the summer's property tax hike. General consensus is that he was voted out by taxpayers who were angry about the tax increase. Or, let me specify: by ignorant taxpayers who had no idea that the mayor has no control over property taxes.

The new mayor hasn't really done much of substance in office so far. He took control of the recently-unified police department from the sheriff, which I'm sure will radically reduce crime somehow. I don't get the rationale for this. The speech I heard, when they announced the leadership shift, said that the public needed to see control of the police department in the hands of a responsible elected official. Umm, I thought that "sheriff" was an elected office. But having the mayor in charge of the police will apparently boost the morale of the police, which will reduce crime.

Let me make sure I understand this. A change in leadership will make the police happier, which means they'll start caring about their jobs, which means they will start actually doing their jobs well for a change. I feel safer already.

Other thoughts on the week's news:
  • Best headline ever, from the Indianapolis Star: "Bomb Squad Defuses Turnip"
  • Eliot Spitzer: my biggest thought on this is, exactly what service do you get from a prostitute for $5000? And, that's apparently $1000 an hour. What do you do for five hours? This seems like a long time to perform the horizontal bop, unless I've been doing it wrong all these years....
  • Least surprising AP headline ever: "Congress Fails to Pass Earmark Limits".

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