There’s One For You, Nineteen For Me – Ideas For The Better Investment Of State & Local Taxes In Indiana

by Faegre Baker Daniels
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There’s a fair amount of talk lately about cutting taxes, instituting new taxes, and simplifying taxes in Indiana. All this is healthy debate, but we also need to focus on the distribution of our tax dollars.

Here are some ideas that should help us invest more where it counts:

  • The business personal property tax, which raises about a billion dollars annually for local government, should be eliminated to spur job creating investments in our communities and it should be replaced by the existing corporate income tax, which raises about a billion dollars annually for the State. (If not the corporate income tax, it has to be replaced with something else.)
  • Those who work in one community and live in another should bear some of the costs associated with the roads and public safety of the community in which they work, not just where they live. In lieu of a new commuter tax, the State should at least establish the minimum amount each local government currently receives from income taxes and have a 50/50 split based on where you work and live over that base amount. Over time, the amount split will grow due to growth and inflation. This is a start that doesn’t require more from the taxpayer.
  • The General Assembly should create a new program where cities can, in partnership with the Indiana Economic Development Corporation or some other state agency, create new sales tax increment financing plans of limited duration to leverage the sales tax generated from new commercial developments, like a grocery store in an underserved neighborhood. Locals can pair such investments with other incentives. Done right, this will lead to more jobs and more sales (and other) tax generation.
  • If Republicans and Democrats can just look past their brethren holding office in the townships and enact meaningful reforms, there are tens (if not hundreds) of millions of dollars to be unleashed to better serve those in need.
  • Schools need to more aggressively reduce the costs of administration and get more dollars to teachers and the classroom. Period.
  • And, as I’ve suggested before, the State should help refinance local government property tax debt issued prior to the property tax caps to lower costs of repayment, and the State should reform the state road funding formula to tie more directly to use of roads.

I don’t have the data to understand all the implications of such changes, but that’s why we have the State Budget Agency, the Legislative Services Agency, and so many others to help our decision makers to find the right balance. Regardless, I hope these ideas are a catalyst for more discussion and forward movement.

Ultimately, with prioritization and pragmatism and continued efforts to cut costs and to pay down debt, we can get more growth-oriented policies in place—like the elimination of the business personal property tax and increased investments in early childhood education, job training, the arts, and infrastructure—to make even better use of precious taxpayer dollars.

This post also appears today in the Indiana Forefront blog sponsored by the Indianapolis Business Journal.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Faegre Baker Daniels | Attorney Advertising

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