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News-Sentinel.com Your Town. Your Voice.

Voters likely to approve permanent tax caps - and they're right

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Effect of tax caps

Estimated income reduction because of property-tax circuit breakers (in millions of dollars unless otherwise noted)
Recipient name* 2010 2011 % difference
Allen County $4.3 $5.39 19
City of Fort Wayne $9.37 $11.46 18
Fort Wayne Community Schools $4.1 $4.86 15
Southwest Allen County Schools $1.6 $1.8 11
Northwest Allen County Schools $1.59 $2.1 24
East Allen County Schools $504,306 $573,595 12
Allen County Public Library $1.57 $1.9 19
Total countywide: $24.6 $30 18
*Total includes other units not included in the chart. Source: Allen County Auditor's office
Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.The Associated Press

Limits can still be waived, and revenue will rise even with them.

Saturday, October 30, 2010 10:00 am
I could save us all a lot of trouble by concluding this column with one more sentence: Hoosier voters should approve constitutional limits on property taxes if for no other reason than The Journal Gazette and public-employee unions are terrified at the idea.But there are plenty of other good reasons to support the tax-cap referendum on Tuesday's ballot – as 52 percent of respondents said they would in a poll released this week by the Mike Downs Center for Indiana Politics and partially sponsored by The News-Sentinel.

If you believe the unions' ads or the morning newspaper's recent editorial, making the caps permanent would be nothing short of a bureaucratic Armageddon, costing the jobs of countless police officers and firefighters and, as the Journal put it, “schools, libraries and parks may well decline (in quality) or require increases in other taxes and fees.”

But the editorial contradicts its own argument with the admission that “increases in other taxes and fees” are possible even if the caps are added to the state constitution. What's more, as the writer also points out, the amendment would allow voters to waive the caps should they choose to – as residents of the East Allen County Schools district will be asked to do Tuesday.

According to an analysis of 2,387 tax-increase proposals in 22 states released this week by The Associated Press, voters in 19 of the states said “yes” about half the time. But the Downs Center poll found that 57 percent of Hoosier voters would oppose a property-tax increase for schools – a response that does not bode well for EACS' proposal.

But is that necessarily a bad thing? New Haven Mayor Terry McDonald doesn't think so, arguing that more money would simply allow the district to avoid making the politically difficult cuts needed to improve academics. What's more, property-tax revenues will increase over time even without voter approval.

Enacted by the General Assembly in 2006, the caps limit taxes on most homes to 1 percent of the assessed value, 2 percent on apartments and farms, and 3 percent on commercial properties. And the impact has been dramatic: About $24.6 million more in property taxes would have been collected countywide this year if not for the caps. Next year that figure is expected to grow to about $30 million.

Statewide, the caps are expected to reduce revenues by about $428.5 million this year, $577.5 million next year and $558 million in 2012.

But as Deputy Auditor Tera Klutz pointed out, the amount of property taxes collected countywide is still expected to increase by at least $4 million in 2011, thanks to a growth factor of 2.9 percent allowed under state law, tax increases on properties still below the caps and any increases in assessed value.

But local governments' biggest financial challenge may come from something not affected by the caps at all. Thanks to the poor economy, the county option income tax that generated $46.4 million this year is expected to bring in just $36.6 million in 2011, a drop of 21 percent. City Council could increase the tax, but has been reluctant to do so.

All those numbers probably make your head want to explode, but the bottom line is pretty simple: The caps won't prevent officials from spending more money – if they have enough courage and persuasiveness to make their case.

And that's the real point here. Taxpayers don't exist to serve government. Government exists to serve taxpayers. When the public decides it is willing or able to pay only certain amount for government and no more, public employment, salaries and services must be adjusted accordingly.

That's not always how it's done, though, which is why the federal debt is $13 trillion and counting. The people may not want to pay for more government, but government refuses to curb its appetite. So it borrows instead, sucking cash the way black holes consume light.

Thankfully, state and local governments don't have that luxury. As county Auditor Lisa Borgmann said, county government “has been preparing for this for a long time. We've cut 128 jobs in seven years.”

Raises have been scarce, too, so it's no surprise that public unions fear and loathe the caps. But that frugality also helped the county amass more than $21 million in its rainy-day fund, $4.5 million of which will offset decreases in revenues anticipated in 2011.

Eventually, the caps will persuade even recalcitrant politicians and union bosses to embrace the realities faced by those who pay their bills. Death and taxes may be inevitable, but tax increases don't have to be.

“Taxpayers are ready for something they can depend on,” Borgmann said. Something good, she means. Tuesday, they'll get it.

More Information

Effect of tax caps

Estimated income reduction because of property-tax circuit breakers (in millions of dollars unless otherwise noted)
Recipient name* 2010 2011 % difference
Allen County $4.3 $5.39 19
City of Fort Wayne $9.37 $11.46 18
Fort Wayne Community Schools $4.1 $4.86 15
Southwest Allen County Schools $1.6 $1.8 11
Northwest Allen County Schools $1.59 $2.1 24
East Allen County Schools $504,306 $573,595 12
Allen County Public Library $1.57 $1.9 19
Total countywide: $24.6 $30 18
*Total includes other units not included in the chart. Source: Allen County Auditor's office

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