We can’t afford not to.

Where's the moneyPeople frequently ask, “If you abolish the property tax, how would you replace the revenue”?

There is no silver bullet that will solve the problem. It would be tough but we could do it if we set it as a goal. We would have to chip away at it, and find several sources of income.

However, unless we have accepted that property tax is unjust, we will never go through the pain it will take to quit using its revenue. In this sense, property tax is like child labor, or slavery. As long as people were in denial about the evil of those institutions they would always say, “We can’t afford it.” The truth was just the opposite. In the long run child labor and slavery were expensive because of the human potential they squandered. We just can not afford a tax system that punishes a big family because it needs four bedrooms, or punishes people for improving their neighborhood, or drives manufacturers to send their jobs to China.

So, if we agree that property tax must go, how would we replace the revenue? One simple solution is to just move to sales and income tax. This has been calculated from our states actual revenue stream and would take a two percent increase in both sales and income tax. You can see the math at this link to the 2/2/2 plan. Critics have said the numbers don’t work, but they have provided no evidence for this assertion.

Doing some other things could lower the higher taxes of the 2/2/2 plan.

  1. We could put a sales tax on the sale of homes. The tax could be rolled into the mortgage and paid off over time at a rate equal to or lower than existing property tax. Once you had it paid off you could finally own your own home.
  2. We could impose a fee per unit for public safety and sanitation. These are services related to the property and there cost would be modest. A fee system would not require the expense and error of the assessment system.
  3. We could broaden rather than raise sales tax. Many services are not taxed in Indiana. Why do we expect every pushcart peddler to collect and remit sales tax but it is too difficult for accountants?

There you have it. Several reasonable ways we would move away from property tax to fairer taxes based on the ability to pay.

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3 Responses to “We can’t afford not to.”

  1. Mike Lowry Says:

    So, If I read your blog correctly, you want to begin taxing services in Indiana. Do you want us to pay taxes every time we get a haircut or manicure? What about oil changes too? Seems to be pretty extreme taxing to me—more like a tax increase across the board. I don’t think the public would enjoy such a measure.

  2. kenmorgan Says:

    Hi Mike
    Of course the first thing we must try to do is decrease government spending. However, if we want to eliminate a whole class of taxation we will have to find the income somewhere. Many services are allready taxed in Indiana. It would be my prefence to make that more uniform before we start raising sales tax. Finding revenue in that way would not put Indiana at a competitive disadvantage via other states by raisiing sales tax.

    One of the straw man arguments raised against eliminating property tax is that “we would have to raise sales tax to 12%.” That is a rediculous idea, and has never been proposed by any of the abolition activists I know. Instead, we seek to find many different small incremental ways to shift the tax burden to a more equitable base.

  3. Darien Says:

    I still say pass legislation to be able to use cameras to cite traffic violations. A photo showing time, date, location, speed and a person’s license plate. This is a voluntary tax, as people know if they do not obey laws they pay a price. If they don’t want an expensive ticket or number of tickets, they can drive the speed limit, stop at red lights, and otherwise obey traffic laws.

    Orwellian? Perhaps, but a few cameras placed around various larger cities in Indiana would free up officers from speed or stop light violation (non accident) related policeing, encourage people to actually OBEY traffic laws, make the streets safer, lower overall costs related to insurance, emergency runs, hospital, and other related costs. In addition, it would rack up the revenue not only from residents of the area, but out of town travellers who need to be obeying our laws as well. The revenue would directly fund the local government where the ticket was issued. Larger metropolitan areas would collect revenue in proportion to their higher levels of population and traffic.

    You get the idea…

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