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Doing what’s right

Randy West, Editor

We don’t envy Gov. Frank O’Bannon, Lt. Gov. Joe Kernan, State Sen. Richard Young, State Rep. Paul Robertson and other members of the Indiana General Assembly, as they contemplate the upcoming “short session” blood-letting.
Last year the Indiana Tax Court ordered the state to come up with a new method of assessing personal property for taxing purposes, which meant that a whole new system of taxation had to be developed fast. A lot of good people went to work on this challenge.
Unfortunately, since Sept. 11, things have changed, as we all know. The restructuring must now be done with the state struggling for revenue in an ailing national economy. All our government leaders have to do is achieve … the impossible.
Of course, they will not come up with a perfect plan. They never do, and that’s because a perfect plan is simply impossible. You can never please the entire populace when it comes to taxes because every tax is unfair for someone, and with lobbyists and powerful special interest groups applying pressure in the hallways and committee rooms of the Statehouse, there will always be special legislation that gives certain groups a break. That’s how legislatures work. If you don’t like it, talk to your legislator.
Nevertheless, the O’Bannon-Kernan Administration has made some proposals in their “21st Century Tax Plan” that deserve consideration. O’Bannon and Kernan are two very good and experienced public servants, and they haven’t taken this assignment lightly. (In fact, how it works or does not work will have a big impact on Kernan’s political future.)
They want to continue to make Indiana a good place for business and job creation; they do not want to hurt our excellent educational system, and they don’t want to hurt property owners, who will almost certainly see their taxes go up when a new market-value assessment is completed, as ordered by the tax court.
The O’Bannon-Kernan plan will be less reliant on property taxes to pay for services, including public schools. The plan will stop using property taxes to pay for welfare. The state will pick up the cost instead, as it should.
It will permanently set the Homestead credit for homeowners at 15 percent. (It is now 10 percent but due to drop to four in 2004.)
The plan will increase the earned income tax credit for people with low incomes, and the renter’s deduction will jump by 50 percent.
The business inventory tax and corporate gross income taxes will be eliminated. Those will be replaced with a business franchise tax and a new corporate adjusted gross income tax, which should be simpler and fairer to businesses.
The research and development tax credit will go from five percent to a hefty 20 percent.
The sales tax will be increased by a penny on the dollar. The cigarette tax and the gaming admissions taxes will go up, and tobacco settlement money will be used.
The income tax will have two tiers: The first $90,000 of state taxable income will be taxed at 3.9 percent; income above that will be taxed at 4.4 percent.
Not too long ago, Indiana’s economy was booming, and there was a huge $2 billion “rainy day” budget surplus that Democrats were exceedingly proud of. That has changed drastically. The economic downturn, the events of Sept. 11, and the war in Afghanistan have all had a devastating effect on Indiana’s once-rosy revenue projections. The “rainy day” is here, and most of that money has been used. Other states have had similar problems.
As you might expect, a lot of people have already started grousing about the O’Bannon-Kernan plan, mainly rich Republicans who can’t help but whine about high taxes and rarely offer any credible or humane proposals of their own. Their main concern is their stock portfolios.
Indiana, after more than a decade of incredible prosperity, has joined the rest of the world in dealing with tough times. Like the people in New York City, we have to pull together, to find the best possible way to deal with our problems. The best way to do that is for everyone to willingly sacrifice for the privilege of living in the richest country on earth with the best schools and the best government and strongest military. We have more money and we gobble up more resources than any other people in the history of the world. If we can’t afford to pay taxes to live in and support this community, this state and this country, then we’re a sorry lot.
People who can afford to own property ought to be elated to pay taxes, although we’re sympathetic with farmers who have large tax bills during lousy harvests. People who live in big houses and mow lots of acreage ought to have big tax bills. (Maybe they should pay a penalty tax for all the wildlife refuge they’ve permanently eliminated.) Large corporations seem to get a lot of tax breaks, but they should be willing to pay large tax bills, although the inventory tax is especially unfair during hard economic times. A sales tax seems fair on the surface because everyone has to pay, but it’s very unfair to those at the bottom of the economic ladder. We see nothing wrong with increasing the income tax, progressively. If you make more, you should pay more, gladly.
Why is there no increase on liquor or alcohol sales? And has anyone thought about taxing people convicted of domestic violence, spouse abuse or child molesting?
We hope the legislature does not replace one confusing tax structure with another.
O’Bannon said before a TV speech (that no Louisville stations bothered to carry): “I will be calling on the members of the Indiana General Assembly to join me in doing what is right for the state.”
Let’s hope they do. If everybody applies enough pressure, they will.