HICKS: Muncie's status quo is high taxes, poor service

July 13, 2009

Muncie’s current debate over the Local Option Income Tax, or LOIT, is ripe for journalistic musings.

Property-tax caps, as well as a dwindling population and commercial base, have left the city in the uncomfortable situation of cutting budgets. Since the bulk of costs are related to fire and police salaries, few options are available. The city has turned to the short length of rope the Legislature offered amid the debate on property tax caps—the LOIT.

On July 6, hundreds of folks descended upon city hall to argue for and against the new tax. I’d love to relate it in detail, but to do the event true justice requires an accomplished playwright.

It had all the parts of high drama and farce: a threatening and psychotic voice-mail orchestrated by the firefighters and sent to the mayor; a conspicuously absent city councilman (also a fireman) under multiple indictments related to election fraud; and the UAW very publicly siding with the citizens taxpayer group against the firefighter union.

And as with any good drama, a touch of farce was present in the form of a community group spinning itself as the broker of fresh ideas, when what it really was hawking was more of the same failed politics that have idled the city for too long.

What struck me most throughout the two-hour session was that so few in the hall seemed to understand Muncie’s greatest threat—the status quo.

City government can really affect two things about itself: tax rates and quality of public services. Residents and businesses choose to locate in places based upon taxes and the quality of those services.

Some people and businesses prefer low taxes and few services. Others are willing to pay higher taxes in return for better services. The past few decades have seen growth in communities that balance the two, be they high or low. While low-tax/high-quality services are rare (and attract lots of new residents), high taxes and poor public services are all too common. These places stagnate and dwindle.

Muncie, like a good many midsize cities in the Midwest, is losing population, commerce and options. Simply “getting by” is the fastest road to ruin. Cities like Muncie have to listen more closely to the faint voices of two largely forgotten groups—those who have left the city and those who have chosen other locations outside the city.

The leavers constitute one out of every 25 families since 2000, while more than half of those who are newly hired by the city’s leading employers choose somewhere else to raise families. Muncie’s status quo is high taxes and poor services. The status quo is long-term disaster.

Because of a poorly designed law, the city gets to levy a countywide LOIT. Ironically, this will only serve to exaggerate the public-service-quality rift between Muncie and the surrounding communities where dollars have been spent far more wisely.

At least the road out of town will be well-paved.


Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.


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