Education & Workforce Development

EYE ON THE PIE: Novel ideas from Pat and Beurt

August 14, 2006

Pat Bauer is a longterm member of the Indiana House of Representatives from South Bend. A Democratic majority in the lower house will make him again the speaker of the House, one of the few powerful voices in the state's governing structure. Some do not view Bauer as the progressive sort of leader the state needs today. Yet his ideas are based on an experienced and solid reading of public sentiment.

Beurt SerVaas is retired from a productive career in public office. A Republican, he was the powerful president of the Indianapolis City-County Council and one of the nation's most perceptive and successful entrepreneurs. In his late 80s, SerVaas continues to offer ideas that generate significant controversy.

When either of these men speaks, we all need to listen, whether we like what we hear or not.

Recently, Bauer suggested that the state suspend and/or eliminate the 6-percent retail sales tax on gasoline purchases. That would save consumers about 17 cents when gas prices are around $3 per gallon. But the state's revenue would be cut $150 million or more per year.

Do we really want to make driving less expensive? Many thoughtful people argue that we need higher, not lower, prices to moderate the orgy of gasoline consumption. Yes, it sounds good to lower the pump price of gasoline. It fits with the "me first" philosophy of so many consumers. But Bauer's proposal would be contrary to our hopes to conserve energy, to reduce urban sprawl, and to bring fiscal integrity to the state.

Nonetheless, we should pay attention to Pat Bauer's proposal because it raises a fundamental question. What purchases should be covered by the retail sales tax? We already exclude food for consumption at home and prescription medicines because we consider such items "necessities." Has gasoline become a necessity?

If gasoline is excluded from the retail sales tax, then what about other energy sources? Certainly electricity and gas are essentials to our lives. People who do not own cars are consumers of these necessities. Should the Bauer proposal go beyond gasoline to other goods and services? Should we extend the retail sales tax to currently untaxed areas, such as haircuts and higher education? Rep. Bauer may not have intended it, but he has opened the door to a reconsideration of our state's retail sales-tax policies.

Similarly, SerVaas stirred controversy with his daring concept that would bring water from Lake Monroe to the Indianapolis area. Bloomington folks were outraged. But whose water is it, anyway? Hammond sells Lake Michigan water to Illinois suburbs. Muncie, Anderson and Indianapolis are among the many cities drawing on the West Fork of the White River.

Water rights have been the source of intense conflict for more than 150 years in this country. The SerVaas proposal is no more outrageous than efforts to sell water from the Great Lakes to Arizona and other places not blessed with aquatic resources. At least this would have kept Indiana water in the state.

Lake Monroe was built by the Army Corps of Engineers and is maintained by the Indiana Department of Natural Resources. It is not the property of Bloomington or Monroe County citizens. Yet it does seem "unfair" to threaten the growth of the Bloomington area by accommodating the thirst of the Indianapolis area.

Even though SerVaas has withdrawn his proposal, the idea will remain with us. It will be revived in the future by someone else. He has done us a service by stimulating discussion about water-supply issues that determine the growth and distribution of population and industry in our state. Our long-term interests are tied to water conservation.

Whether ideas are popular or not, they have value when they force us to look more deeply into the underlying policies of our society.



Marcus taught economics more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. To comment on this column, send e-mail to mortonjmarcus@yahoo.com.
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