Government and Manufacturing & Technology

STATEHOUSE DISPATCH: Tax reform is tricky, but legislators aren't giving up

February 19, 2007

The coming week will bring intense action in both the House of Representatives and the Senate as the chambers complete committee deliberations on bills in their respective chambers of origin.

As of this writing, final floor action that would allow bills to cross the Statehouse Rotunda would take place by early in the last week of February.

Missing from this session seems to be any real sense of urgency in moving measures through committee and on to the floor of the House.

We already have commented here about the lack of a detailed property tax reform package (incorporating the local government Hometown Matters recommendations) from Senate Republicans, and House Democrats also took their sweet time introducing a property tax measure of their own.

The property tax relief measure just considered in the Senate calls for the elimination of the property tax, but serves up no mechanisms by which to replace the lost revenue. That task, backers-and there are many of them, because the elimination concept sounds good on paper-claim, would fall on the shoulders of legislators and other bright minds in Indiana over the next four years. They believe the looming deadlines would force action.

This bill appears on the surface to have lots of backing among lawmakers. But, in truth, the support is broad but not deep, and legislative leaders in both chambers and from both major political parties seem to view it as more of a distraction and annoyance than a legitimate policy option.

Democrats recently failed to vote their own highly touted property tax package. While a plurality backed the bill, it fell two votes short of a constitutional majority.

One of those Democrats, Rep. Craig Fry, Mishawaka, is laying the groundwork for a primary run for mayor in his hometown. And although he stands on principle against a measure that he is concerned would simply raise local income taxes with no discernible benefit for his constituents, others note that a vote for a bill like this would not be a politically wise move headed into a primary contest just two months away that already includes two opponents.

Democrats had the ability to add enough Republican votes to pass the bill, HB 1007, but refused to accede to any of the several amendments Republicans offered. That offended the top House fiscal Republican, Rep. Jeff Espich, Uniondale, who suggested it would not be appropriate to vote for a measure into which he had no input.

"Property tax relief is dead for the 2007 session of the Indiana General Assembly, unless the governor chooses to revive it," House Speaker Pat Bauer, D-South Bend, declared after the vote Feb. 13.

Bauer added (somewhat disingenuously, given that he couldn't even corral his whole caucus for the bill) that it appears the governor "will need to convince members of his own party that property tax relief for the people should be a priority in 2007."

HB 1007 is not technically dead, because it did not receive at least 51 votes for or against it, but with business interests lobbying heavily against the bill because of the new local option corporate income tax it would impose, it is doubtful enough Republican votes will change to advance it.

That means you should watch events unfold during the second half of the session, when attention will turn to Senate Tax & Finance Policy Committee Chairman Luke Kenley, R-Noblesville.

He will be the one to make the next attempt to craft a package that will address the fiscal issues, the political imperatives and the balancing of the interests of individual taxpayers and homeowners and business and manufacturing operations.

Kenley also must do this in a politically palatable format. This will be a tall order, but, despite how it might look from the first attempt in the House, Speaker Bauer and Senate President Pro Tem David Long, R-Fort Wayne, are pushing for a resolution to the issue, and the budget bill gives them some time-and political and fiscal cover.

Ignore the rhetoric and watch the serious fiscal minds at work here.
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