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Saturday, September 23, 2017
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  • WEST LAFAYETTE –  The most wonderful time of the year has come and gone for those who follow the Indiana state budget. On July 19, the State Budget Agency presented its accounting of what happened to revenues, spending and balances in fiscal 2017. The state ran an annual surplus of $42 million, and ended with balances of $1.78 billion, down from $2.24 billion in 2016. Wait a minute, says anyone who’s ever kept a checkbook. If I earn more than I spend, the balance in my checkbook goes up. What kind of arithmetic causes an annual surplus to produce a decline in balances? Calculating surpluses and deficits can be tricky. When you calculate the surplus, what counts as revenue? What counts as spending? To get that $42 million surplus, the state counts all the general fund revenues received from sales, income and other taxes, and from charges and fees. That was a little less than $15.5 billion in fiscal 2017. It then calculates the amount of spending, as appropriations plus some adjustments, less “reversions.” Reversions are money authorized in the budget but never spent. Revenues actually received, less money actually spent, gave that $42 million.
  • WEST LAFAYETTE – Think of the changes in the Indiana property tax system between 1998 and 2010. The Indiana Supreme Court threw out the assessment system in December 1998. We started using market values for the reassessment in 2003. In 2002, we changed the formula for calculating the maximum property tax levy, and created a huge deduction for homesteads. In 2004, we amended the Indiana Constitution to allow those big homestead deductions. In 2008, we increased them even more. We phased out the property tax on inventories from 2003 to 2007. We began annual adjustments of property assessments in 2007, which we call trending. We eliminated the property taxes for school general funds in 2009. We put property tax caps in the Constitution in November 2010. That’s a partial list. In the midst of all this policy chaos, we had the worst recession since the Great Depression, so bad that it reduced the value of property. Our new assessment system caught that decline in property values, so assessed value actually decreased for a couple of years. Practically every year for 12 years, policy changes or economic disruptions rocked Indiana’s property tax system. By the end of it all, we had no idea what “normal” looked like.
  • WEST LAFAYETTE – The late great George Carlin had a routine about a weather forecaster. “The forecast for tonight, dark. Continued dark throughout the night, with scattered light in the morning.” Some predictions are easy. Predicting the base rate of farmland used to be easy too. The base rate is the starting point for setting the assessed value of farmland for property taxes. The state’s Department of Local Government Finance (DLGF) recalculates it every year with a capitalization formula. They divide measures of farm income by a rate of return. The base rate for taxes this year is $1,960 per acre. Here’s how easy it was. The base rate for taxes in 2015 was calculated in 2014, averaging data from 2006 through 2011. There was a four-year lag between the most recent numbers and the base rate used for taxes. I could take numbers that were already in the books, feed them through the DLGF’s set formula, and come up with a really accurate prediction. In January 2012, I predicted the base rate for 2014 at $1,760. Nailed it. In January 2013, I predicted $2,050 for 2015. Right again. It was no big deal, like “scattered light in the morning.”
  • WEST LAFAYETTE – Consider the eternal questions. Why is the sky blue? Why is the grass green? Why are some Indiana local government property tax rates high, while others are low? Let’s leave the answers to the first two to actual scientists. I’ll take a stab at that last one. Suppose we measure the revenue capacity of Indiana local governments. Our counties, cities, school districts, libraries and townships receive revenue from property taxes and local income taxes. Schools get a lot of aid from the state. Counties, cities and towns receive state aid for roads. And there are interest earnings, charges and fees, and dozens of other smaller revenue sources. Let’s calculate the average property tax rate for all Indiana local governments, then multiply that rate by the taxable assessed value in each county. That gives the amount they could collect if their tax rates were just average. Calculate the average revenue from local income taxes by multiplying the average local income tax rate by each county’s taxable income. Then add in school and road aid, which depend on state aid formulas. And take the state average of the other revenues per person, and multiply by county population.
  • WEST LAFAYETTE – The General Assembly is in session, and the big issue this year looks to be road funding. How will we raise the additional $1 billion or more that we need to maintain our roads? Funny thing, we seem to be wedded to the idea that those who use the roads should pay for them. We don’t always think this way for other expenditures. We don’t for K-12 education. The Constitution doesn’t allow tuition for public schools. The authors must have thought that an educated public benefitted everyone, not just the kids and their parents. You could make the same argument for roads. We all benefit whether we drive or not. Even if you walk to the grocery store, the food on the shelves has arrived in trucks, driven on roads. But, for whatever reason, we want drivers to pay for roads. That’s why we accept excise taxes on motor fuel as a way to fund road maintenance.
  • WEST LAFAYETTE – Is it September already? While I’m gearing up for my economics class at Purdue, it’s a good time to take a look at the economy. Got to offer those eager young people the latest word!  Let’s start with gross domestic product, our main measure of goods and services production. GDP grew 1.2 percent above inflation from July 2015 to June 2016. That’s pretty slow. Don’t blame consumers. Consumer spending increased 2.7 percent above inflation over the past year, and when people buy, businesses produce more products and hire more employees. There are good reasons to think that consumers will keep spending. Job prospects are better. Wages are edging upward. Home and stock prices are up. Let’s put consumers down for 3 percent spending growth next year.
        
  • WEST LAFAYETTE – The good folks at the Indiana Department of Education sent me some school finance numbers to play with. School finance is a big topic in the Indiana General Assembly this year, so this is a good time to do some number crunching. Here’s number crunch one. In fiscal year 2015 – that’s July 2014-June 2015 – the state will distribute almost $6.6 billion to public school corporations and charter schools. State aid was $6.2 billion in calendar year 2012 (it was switched to fiscal years in 2013), so that’s an increase of 5.1 percent in two and a half years. Consumer price index inflation was about 3.4 percent during that period, so there’s been a small increase in what state aid can buy. Inflation is expected to be about 2 percent per year during the next biennium. Will aid increase enough to match? The increase in state aid will be one of the most closely watched numbers in the debate over the next budget.
  • WEST LAFAYETTE – Once again, farmland assessments and property taxes are going up. The Department of Local Government Finance, which oversees the property tax in Indiana, has set the base rate per acre of farmland for 2015 taxes at $2,050 per acre. That’s a 16 percent increase from the base rate for 2014 taxes. In December the DLGF announced the base rate for 2016 at $2,420, another 18 percent increase. The base rate has been rising for years. But, this year, it’s a hot topic in the General Assembly. The base rate is the starting point for farmland property tax assessment. It’s a statewide dollar amount per acre. It’s adjusted by each acre’s productivity index so that the acre’s value reflects how much corn it can grow. Some values are adjusted downward for factors like forest cover or frequent flooding. The resulting assessment is multiplied by the sum of the tax rates for the local governments where the land is located. That’s the tax bill.
  • WEST LAFAYETTE - The headline said “Hoosiers’ taxes rise as income goes down.”  The story told of the Tax Foundation’s finding that Indiana taxes had increased from 8.4 percent of income in 2001 to 9.5 percent of income in 2011. Like many, I thought, “You’ve got to be kidding!” Our Legislature has passed big tax reforms, we’ve voted for constitutional amendments, we’ve seen property tax cuts, income tax cuts, corporate tax cuts. And our tax burden has gone up? How?

  • By LARRY DeBOER

    WEST LAFAYETTE -The Indiana General Assembly may consider eliminating property taxes on personal property in the upcoming session. Personal property is almost entirely business equipment. Eliminating this tax could encourage more business investment in Indiana, especially since some of our neighboring states have already eliminated this tax. Personal property owners pay about a billion dollars in property taxes to local governments, which is 16 percent of total property taxes. Eliminating this tax would create some big tax and budget issues for legislators to consider. Here's why.

  • WEST LAFAYETTE — July 11 was one of the great days on the number-crunching calendar. It was Indiana’s “close-out,” the day the Indiana State Budget Agency wraps up the numbers for the fiscal year.
        
    And there’s no doubt, we’re in good shape. We took in more revenue than we spent in fiscal 2013, and we’ve got nearly $2 billion in the bank, which is a healthy 13 percent of the total budget.
        
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  • Pence presses Donnelly on tax reform as McCain scuttles health bill
    "We will make America safe again. We will make America prosperous again. And to borrow a phrase, we will make America great again." - Vice President Mike Pence, appearing in Anderson to push President Trump’s tax reform plan. Pence made a pitch to Democratic U.S. Sen. Joe Donnelly, who attended the speech, saying, "Senator Joe Donnelly we need your help." Pence’s appearance came as U.S. Sen. John McCain announced he will vote against the Graham/Cassidy health care bill, saying, “I cannot in good conscience vote for the Graham-Cassidy proposal. I believe we could do better working together, Republicans and Democrats, and have not yet really tried.” Pence had been lobbying Senate Republicans to support the plan, which is now opposed by McCain and Sen. Rand Paul, with Sen. Susan Collins likely to vote against the measure.
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  • Mike and Hillary
    We’ve watched 2016 Democratic presidential nominee Hillary Clinton make the rounds on her new book: “What Happened.” The reaction has been cringes from Democrats hoping to move on, a set-the-record mentality from some journalistic quarters, and taunts from Republicans. Vice President Pence has the best line of all, with this tweet Thursday morning: “The first book that has the question and the answer on the cover.” Good line, Mike, er … Mr. Vice President. It harkens back to those studio days near the Speedway and a retreat to Claude & Annies. - Brian A. Howey, publisher
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