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Tuesday, August 28, 2007

How much to replace property taxes?

Indiana estimates that property taxes could be eliminated altogether by:

"increase the state sales tax from 6 percent to 13.2 percent
the state income tax from 3.4 percent to 9 percent to eliminate property taxes.

To replace property tax revenue using a 50-50 split, the state sales tax would have to be raised to 9.5 percent and the state income tax to 6 percent, Powers said."

I don't know if those numbers sound accurate or not. I have not read the legislative report (nor can I find it at the moment)

Either way, a point raised by this is that if such an increase drastically increases the disparity in terms of types of taxes levied between Indiana and neighboring States, that could really distort markets and firms' decisions, etc. Really, a Fair Tax-like proposal needs to be implemented at the national level before the incentive for States to enact similar measures can really materialize.

At most, as I've advocated in a previous post, a good mix of income and sales tax hikes combined with the elimination of property taxes (combined still with a complete reorg of local governemnt and how schools etc are funded) may (or may not) seem to be the best bet since then the disparity in terms of sales and income tax is lessened, and property taxes (deemed to be unfair) are still eliminated.

Of course...I'm still waiting for those pesky numbers...



Anonymous said...

I completely agree. We need an approach that utilizes a combination of factors. That's why I stand with The Hoosier Property Tax Reform Alliance in demanding immediate and lasting change in Indiana’s property tax system.
I. I believe the state of Indiana needs meaningful reform to our property tax system.
II. I believe we need equitable, county-level assessments by trained, highly qualified property assessors.
III. I believe homeowners’ should have a reasonable expectation of their property tax bill and the assessment should be capped at 1% (one percent) of the property’s true value.
IV. I believe I have the right to hold my local government accountable for their spending.
V. I believe government should be transparent and taxpayers have a right be informed and have input into how their taxes are spent.

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