A case for property tax?

• Author: Barkey, Patrick M.
• Position: Indian Governor Frank O'NBannon's tax reform plan - Brief Article

A downside to the scale-back in Gov. O'Bannon's plan?

Empathizing with Hoosiers over the evils of taxes--especially property taxes--has been a sure-fire applause line around the state for years, but the failure of political leaders to actually deliver meaningful change makes the act wear thin. Unfortunately, the overly simplistic logic used in most tax-bashing tirades does little to prepare the electorate for the real issues involved with comprehensive tax reform.

Should Local government's reliance on the property tax be eliminated or drastically scaled back? The scale-back embodied in Gov. Frank O'Bannon's recent tax-reform proposal may be the only politically feasible solution. But reducing the take from property taxes creates problems as well.

Thus we hear, for example, that the property tax is excessively harsh on farmers and should be reduced or eliminated, and that applying state sales taxes to Internet commerce will kill or greatly curtail a promising new industry. With one's own tax bill on the line, such arguments quickly become very emotional. But a moment of rational reflection makes one realize that there must also be something desirable about these tax instruments that helps explain their longevity.

The starting point for a rational discussion of taxes must be a recognition that government at all levels requires funds to operate. There is ample ammunition to fuel a debate over size, role and growth of government, but there is a practical limit on the cuts that can be made. This is particularly so for local governments that provide roads, public safety and education.

In an environment where there are no "free" tax cuts, there is something to be said for Indiana's "three-legged stool" of roughly equal tax receipts from property, income and sales taxes. Each tax has its advantages and drawbacks, and reliance on all three gives the state and its localities some insulation from the negative aspects of each.

The rarely mentioned advantages of the...