Tax coffers are filling in Indiana: in April, income-tax revenues were up by almost $100 million, a 19.2 percent rise.

• Author: Barkey, Patrick M.
• Position: INDIANA INDICATORS

IS THERE SUCH A THING as good news about taxes? Perhaps not. Muscles tense and faces frown at the mere sound of that word. But you should know that there is a quiet tax increase occurring in the state of Indiana that few, if any, of its residents are complaining about. We're all paying more in taxes to the state--quite a bit more, actually--and the governor and the legislature have very little to do with it.

What's happening, of course, is that the economy is coming back to life, and with it, the base for most revenues is growing. That's not a tax increase, of course, in the usual meaning of the term. But it's more money coming out of our pockets and into public coffers, just the same. The difference is that when the base grows, we've got more to spend on ourselves as well.

According to the monthly revenue reports published by the State Budget Agency, 2005 is shaping up to be a very good year for state revenues. In the case of the income tax, especially, the growth has been substantial. In the first quarter of the year, income-tax collections were up almost 11 percent over the first three months of 2004. And in April, an important month for the income tax, revenues were up by almost $100 million over year-ago collections, a 19.2 percent rise.

Growth in sales-tax receipts, while much more restrained, was still reasonably healthy. The last four quarters have seen collections average about 5.4 percent more than year-ago levels. Taken as a whole, the revenue situation for the state is better today than any time in the last four years.

But if you think that this happy news will drive the word "taxes" off the front page for the next few years, you may be disappointed. Here's a hint--there's one very important tax in Indiana that I haven't mentioned yet.

That's right, the property tax. Its revenues haven't surged with the economic recovery for the same reason that they didn't fall when the economy was faltering. Even though the state has switched to an assessment method that is based on market value, the property-tax base remains only very loosely connected to economic activity. And that makes it a tax that governments love, taxpayers hate, and very few people seem to actually understand.

We're about to learn that what was called "comprehensive reform" of the property tax three years ago didn't live up to that billing. Thanks to budget cuts and freezes by state government enacted this session, localities will be under more pressure to raise...