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STATEHOUSE DISPATCH: Daniels pushes tax fix, avoids cluttering agenda

January 21, 2008

The governor's State of the State address on Jan. 15 served up no surprises.

His priority, a conceptual consensus shared by virtually all lawmakers, continues to be long-lasting property tax reform framed in the context of an overall tax cut for owner-occupied residential property.

Beyond that major task, Gov. Mitch Daniels offered nothing in the way of innovative programs for this year. That, of course, is not because he lacks vision or boldness, qualities for which he has been both praised and vilified. But he does recognize that crafting an effective property tax reform package in just eight weeks is a sufficiently daunting task by itself, and he hopes for four more years beyond 2008 in which to pursue other goals.

Then again, as he pointed out, the average waiting time for a visit to the Bureau of Motor Vehicles is down-to slightly more than eight minutes from what seemed like an eternity a few years ago-and if we can remedy that, "we can fix anything."

After he drew the elementary connection between how spending required taxation, he told lawmakers they needed to draw the line on spending, and received a standing ovation from most lawmakers present.

But that applause soon will give way to the reality of making difficult choices about how much Hoosiers want in terms of government services, and how much they should spend to receive them. And even finding that delicate balance doesn't begin to address which classes of taxpayers should bear the burden.

He reminded lawmakers about important achievements they have accomplished recently with bipartisan cooperation in the public interest, and called upon them to do so again with the property tax crisis.

A day after his address, he faced members of the House Committee on Ways and Means, defending and selling his plan.

As the critical components of property tax reform move from the public spotlight in committee hearings across the state to quiet conversations among the fiscal leaders, other issues of importance move to the fore.

In some sessions, those matters would be at the top of the agenda.

The Senate Committee on Pension and Labor heard testimony Jan. 16 on a bill aimed at punishing employers that harbor, transport or employ illegal immigrants. The hearing was moved to the Senate chamber to accommodate strong public interest in the matter.

Concerned about the criminal penalties, potential loss of business licenses, and state intrusion into what they see as a federal prerogative, business interests have been working hard to defeat this high-profile measure.

There will also be attention devoted to shoring up the sagging state Unemployment Insurance Trust Fund.

As recently as 2000, the fund balance was just a shade over $1.6 billion. As of October, it had slipped to about $370 million.

The key players have been working out of the spotlight over the past several months to devise the most painless plan that will keep the fund afloat and avoid having to float bonds, impose short- or long-term trust fund solvency surtaxes, sell tax anticipation notes, or borrow from the feds for the first time since 1983.

Recent tax-and-benefits legislation has compounded the problem. With lowered taxes and increased benefits, the solvency of the fund naturally decreased, and the actions by the Legislature effectively bypassed the solvency safeguards built into the tax schedules. The fund paid out far less than it raised before legislative changes kicked in during 2001. At that point, benefits paid almost doubled, and from 1999 through 2007 benefits paid have risen over the previous year all but once.

Among the remedies being advanced are raising the taxable wage base, or restricting (or banning) the right of employees on temporary shutdown to draw benefits. There also is talk of amending the tax structure to more realistically and fairly distribute the tax burden to employers who lay off the most workers. Disincentives could include higher graduated tax rates, and indexing maximum weekly benefit amounts to neutral economic criteria.

While the early talk had action waiting until 2009, the imperative seems to have grown to where 2008 relief is necessary.

So while property tax is the Legislature's top priority, it is not the only thing on the table, and it hasn't crowded everything else out.

And, like the governor's address played out, that should come as no surprise.



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