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The tax hike you haven't even been thinking about

Thursday, May 9, 2013 - 12:01 am

Just calling something a fee short-circuits the needed debates.

You've probably heard that the city is discussing the possibility of bumping up local income taxes as a way to meet an expected budget shortfall. While you're waiting for that shoe to drop, here's a bit of news: Starting Jan. 1 you're going to be hit with a tax increase you probably aren't even thinking about.

It's not technically a tax hike, city officials might say, and they'd be right. It's a fee increase of $2.40 a month that most residential City Utilities water customers will pay. The $3.5 million a year it will raise will pay for continuing to “oversize” the city's pipes and pumps so there is enough water pressure to fight fires. In the past that work has been paid for through property taxes.

And here's why that is a de facto tax increase: The city is not going to reduce property taxes to offset the $3.5 million raised through the fees. It will keep that money and use it for other city services. Yes, rate payers will get a slight increase in their monthly bill, which is a user fee, but those rate payers are also taxpayers.

Such a move is perfectly in keeping with the history of City Utilities. Garbage collection was also once a service paid for out of property taxes. Then the city instituted a monthly $5 fee that was charged through City Utilities and started using the freed-up $3 million or so a year for other things.

We're not disputing that state-approved property tax caps have put tremendous pressure on city budgets in Indiana. And there is nothing wrong with user fees. In fact there is much to recommend them, and looking for ways to shift the burden from all taxpayers to those who actually get the services is always a good idea. And it's certainly smart for a government to have a variety of revenue streams and keep them all healthy.

But whenever these shifts are made, they never get the kind of discussion and debate they deserve. It's not enough for officials to say, “Well we have a shortfall, and this is the easiest way to fix it.” Such an approach gets government into the habit of looking first at revenue replacement instead of spending cuts when a budget challenge arrives.

We're not na´ve enough to suggest that spending cuts be looked at first, but they at least deserve equal consideration. Only with a complete conversation about all options can taxpayers start to decide what city services they want and are willing to pay for.