Those masters of Happy News, the Indiana General Assembly, are preparing to cut taxes as state tax revenues run higher than their forecasts and ahead of collections last year. Two powerful reasons for Legislative Largess, if you are an unreasoning robot.
Let’s consider this surplus. It’s unexpected. It’s not ordinary.
Comparisons to last year are a mistake. Most Hoosiers have heard of the Covid pandemic. They know 2020 was hardly a normal year. So, if this year is better than last year and better than the forecasts based on last year, maybe this year isn’t as good a year as it seems to the Frequently Forgetful.
Is this surplus a onetime thing or a permanent increase in revenues? We don’t know, and the Legislature doesn’t know. Yet they talk about raising teacher salaries, a good cause, without knowledge of their ability to sustain such benevolence.
Another thing they want to do is continue slashing taxes on business. This time they want to cut the remaining local property tax on business machinery. There might be no objection to cutting still another source of revenue for local government, schools, libraries and others that serve the public, IF those budgets had not already been cut to the bone.
No mildly knowledgeable person can claim Indiana taxes, especially those on business, are too high. On top of that, who pays the overwhelming bulk of state tax revenue? It’s households, the folks tagged for the Sales Tax and the Individual Personal Income Tax. Businesses paying the Corporate Income Tax get reduced tax rates on a schedule that has been around for several years. In addition, businesses get tax abatements on property improvements that are denied to homeowners.
People who grew up listening to Paul Harvey on radio, repeat the mantra, “Business doesn’t pay taxes, people do.” It’s got the ring of truth until you think.
The people who own and manage businesses are not the same people as those who buy from and work for those businesses. The idea business taxes are pushed off on wages and prices is as false as the idea that business taxes reduce investment and productivity.
The truth is no one knows the incidence, that final economic resting place of taxes which vary place-by-place, industry-by-industry, and time-by-time.
If Indiana has a surplus, continue to pay down the under-funded public pension funds. Provide money to improve or replace the rundown facilities of so many local governments. Clean up the many industrial sites abandoned by businesses fleeing their mess. Create a fund to prepare for the hazards of climate change.
And certainly, put aside a pot of money for the inconceivable, but inevitable disaster when no major sport events are held in Indianapolis. That’s a fate worse than, but as sure as, Global Warming.
Morton Marcus is an economist. Reach him at mortonjmarcus@yahoo.com. Follow him and John Guy on Who Gets What? wherever podcasts are available or at mortonjohn.libsyn.com.