Leo Morris: Indiana’s fiscal mix: Maybe we should take a look at spending


When the coal started running low at the mine my father worked in, he considered several options.

The one he decided on was to relocate from Kentucky to Fort Wayne, which had two major advantages. It was large enough to have plenty of employment opportunities not involving coal mines, and his sister and her husband already lived here and could help his family navigate the new environment.

Not once did he think about the comparative tax rates, the cost-of-living implications or the quality-of-life amenities advertised in chamber of commerce brochures.

Whether to relocate is a complicated decision, myriad factors coming into play that are different for each individual potential migrant. It is not the simple cause-and-effect choice sociologists seem to be fond of.

And here I am, my father’s son, having lived in Fort Wayne off and on all these years, now happily retired and pursuing my goal to grow old disgracefully. It matters not one iota to me on a personal basis, therefore, that Republicans in the General Assembly might explore the possibility of eliminating the state income tax.

As someone on a fixed income, it would, however, matter to me very much if they proposed an increase in one of the taxes affecting my cash flow, such as property, sales or excise taxes.

It turns out that being a “taxpayer-friendly” state is complicated, too, involving much more than telling mostly conservative voters in a mostly conservative state that elimination of a specific tax is under consideration.

Unless, of course, you are delusional and think the state will simply do without the money now collected by the income tax. It brought in about $8 billion last year, accounting for nearly 39% of the state’s total revenue haul. However, much of that amount the state decides to keep spending, it will have to get the money someplace else.

Will it raise property taxes after spending years bragging about how much it has cut them? Will it bump up sales taxes, already on the high end at 7 cents on the dollar, not to mention any local add-ons? Will it start charging fees for everything we now take for granted as free? Will it be satisfied with the $1 billion a year it already collects in gambling taxes or encourage us to make even more foolish bets?

Republicans are proposing a two-year blue-ribbon panel to consider both eliminating the income tax and examining “the whole spectrum of taxation in the state of Indiana,” according to the proposal’s author, State Sen. Travis Holdman, R-Markle. We can only hope they will focus more on the latter than on the former.

If they concentrate on eliminating the income tax, they will find reasons to do it, confident it will be the magic missing piece in the “attracting jobs” puzzle they have been trying to assemble for so long. They will be blind to the negative possibilities of raising other fees and taxes, each of which has unintended consequences, opportunity costs and a tendency to inhibit the behavior of those taxed.

If they instead concentrate on “the whole spectrum,” they could come up with an overall tax structure that is fair, transparent and sufficient to the task of governing as well as diverse enough to meet two criteria: 1) It won’t overly burden one group of taxpayers and 2) it will survive a downturn in one or more economic sectors.

I happen to think we have a pretty good mix of taxes right now, but I’m no expert, so I won’t argue too strongly with an economist who says otherwise. It is a matter worthy of healthy debate.

But I do know one thing as one of the citizens who help fund state government: Any “comprehensive look” at taxation that doesn’t start with how much we spend and on what and for what reasons is a pointless exercise. Where the money goes is at least as important as where it comes from.

Leo Morris, columnist for Indiana Policy Review, is winner of the Hoosier State Press Association’s award for best editorial writer. Morris, as opinion editor of the Fort Wayne News-Sentinel, was named a finalist in editorial writing by the Pulitzer Prize committee. Contact him at [email protected].

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