Legislature and Opinion and Statehouse Dispatch and Tax Caps and Government & Economic Development

FEIGENBAUM: Democrats start to embrace constitutional amendment

January 9, 2010

What changed over the last year to make House Democrats so eager to allow Hoosier voters to amend the property-tax caps into the Indiana Constitution?

The calendar.

House Democrats had—albeit reluctantly—embraced the caps (also referred to as circuit breakers) as statutory law as part of a larger package of tax reform and restructuring effectively demanded by the electorate (although we don’t recall voters clamoring for the sales tax increase that was a condition precedent to passing the caps). However, they were far less eager to take a complicated law and allow it to become part of a constitution much more aspirational than technical in nature.

Few issues, however, have seen such agreement among Hoosiers during their political lives as the property-tax-cap constitutional amendment. The Hoosier Survey commissioned by the Bowen Center for Public Affairs at Ball State University finds “strong statewide support”—64 percent—for the amendment among voters, perhaps even more enthusiastic backing than the concept originally received.

When the Indiana Manufacturers Association backed off its opposition to the caps, that left opposition from “only” the Indiana Chamber of Commerce, the Indiana Farm Bureau, and city and county governments and their professional associations. Democrats were ostensibly concerned about the impact of the circuit breaker on local government services, and claimed to want time to assess how the caps would work in practice.

The effect has been about what most expected, but Democrats and Republicans disagree on what it means.

Democrats see employees and vital public services being cut and fees raised to compensate, while Republicans see local governments forced to face the budget reality every Hoosier household confronts. That means becoming more efficient and jettisoning or cutting back frills.

The ostensible failure of affected units of government to make lawmakers feel their pain also has tempered Democratic resistance.

Add a growing feeling of confidence among Republicans that they will be able to recapture the House in November and significant trepidation among Democrats that they are not on the side of public sentiment on the issue, and you understand why a House floor vote is likely within days on a property-tax-cap resolution that would allow a November public referendum on amendment status.

Democrats would be able to find themselves on the leading edge on the tax-cap issue, and perhaps blunt—or even pre-empt—the cap emphasis Republican Gov. Mitch Daniels is expected to convey in his Dec. 19 State of the State Address.

So it appears a good bit of the legislative heavy lifting will take place in the first few weeks of the session, rather than, as has been traditional, waiting until the bitter end.

Still to be resolved in the House, however, will be the unemployment insurance package.

Senate Republicans want to delay the effective date of the pending tax hike on big business, while Democrats aren’t quite so enthusiastic, and see an opportunity to be milked.

Watch for Democrats to require Republicans to make good on their contention that delaying the tax hike will save jobs by insisting on protection for workers or directing some related spending to jobs programs.

Democrats also will seek to paint the GOP as being insensitive to small businesses, because entities with good claims experience were slated to see their unemployment insurance tax rates decrease under the law that could now be delayed.

Democrats also will likely make a political point about Republicans’ wanting to wait for a potential bailout from the federal government.

As of mid-December, Indiana owed $1.4 billion to the feds for loans needed to make the state unemployment insurance fund solvent, and some six states had borrowed more. In making the proposal to delay the effective date of the tax hike, Republicans suggested that, given how deep in debt so many states were finding themselves to the feds, the federal government likely would be forced to step in and forgive the loans or offer an extremely favorable repayment plan.

Don’t expect Democrats to let this pass without grumbling publicly about hypocrisy—Republicans who opposed other federal bailouts are now wrangling for one. Demos, on the other hand, are hinting that the federal government may be more likely to help those who help themselves first, while Indiana would be headed in the other direction.

So we have seeming consensus on one previously divisive issue. But don’t expect Democrats to be so submissive on the unemployment-insurance issue—at least not before winning concessions.•

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Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached at edf@ingrouponline.com.

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