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Commentary: Andrew Steele: Tax games hinder tax policy

Updated: April 16, 2013 3:17PM



The debate over a county income tax has never been all that clear to a large extent because because it impacts different taxpayers so differently.

Even among working property owners, especially with the existance of “circuit-breaker” tax caps, the impact can be vastly different.

Ideology muddles the debate as well. The original idea was to use income tax revenue to reduce property taxes. That’s still a big part of its purpose. And that was a Republican policy idea, whatever people might say today, and whatever Democrats may have supported it at the time.

Now, though, it’s impossible for a Republican to support a new tax, even if it is part of a fundamentally Republican reform package, and even if it supports a core constituency like business by reducing its property tax burden at the expense of personal income-earners.

In many ways the package of reforms proposed by the Republicans on the Lake County Council, Dan Dernulc and Eldon Strong, is perfectly reasonable. They want a county hiring freeze; a training program that would make it possible for staff members to work in more than one department; a system requiring the solicitiation of quotes for any service contract in excess of $50,000; creation of pay-grade classifications for county employees that would standardize wages; and the closing, over three years, of the courthouses in Gary and Hammond.

The administrative silos at the government center certainly hinder reform. They’re tough to break when you have independently elected officials at the top of each one, but efforts to do so are worthwhile.

There are other political problems with it — the two northern commissioners have their “own” courthouses (the southern commissioner has the fairgrounds, as I understand the division of fiefs) and have been loathe to give those up.

These proposals are certainly worthwhile. But associating them with the income tax is probably a disservice to their full consideration.

Partly it’s a timing issue. The revenue issue will need to be dealt with before any spending savings can be had.

Partly it’s about where the income tax revenue would go. That can be difficult to discern — money is to some extent fungible (though that’s severely limited for local governments), and legislation can always change things, especially toward the end of a General Assembly.

But to propose changes in county administration that would yield marginal savings as a substitute for the income tax doesn’t seem to address the issue of how, under rules and circumstances created by the state, the county should structure its revenue collection.

It seems there’s been a general move toward collecting more taxes. Creation of an income tax would include revenue that would not be offset by property tax reductions, and, it would eliminate the property tax levy freeze instituted by the state to pressure the county into creating the income tax.

Or, as is now being considered, with rather curious timing, the levy might be unfrozen without an income tax. The House of Representatives’ vote to do that was likely a move by members to get out from under the responsibility for an income tax — but only after the state’s pressure had had its impact.

Either way, administrative changes are worth considering. But when it comes to deciding on the mix of revenues used to fund local government, these mazes of false choices and shifting external incentives would be best replaced by the more straightforward policy considerations that were the source of the debate in the beginning.



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