State Agency Says Property Tax Alternatives Hit Your Pocket Too

by Jeff Shafer (shafer@wsbt.com)

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State Agency Says Property Tax Alternatives Hit Your Pocket Too

By Beth Boehne

Story Created: Aug 28, 2007 at 5:05 PM EST

Story Updated: Aug 28, 2007 at 5:37 PM EST

(WSBT) Eliminating Indiana's property taxes won't necessarily save you money. The proposed alternatives will cost you, too.

The state's Legislative Services Agency offered its picture of life without property taxes.

Members say to bring in the same amount of revenue without property taxes, sales tax would need to more than double – from 6 to 13 percent.

The other option would be to increase individual income taxes from 3.4 to 9 percent. But increasing those taxes probably won't be popular either.

Some feel it’s not an either-or proposition and could be a combination of both alternatives. But finding the right formula means driving down a rocky political road.

A top seller at Gates Automotive is the Chevy Impala with a sticker price tag of about $23,000.

What's the current sales tax on it?

“It’s roughly $1,460,” said Sales Manager Jeff Lennex.

But if you bought it with a state sales tax scenario of 13 percent?

“Your sales tax would increase by about $1,600, it would go over $3,000,” Lennex said.

And for Lennex, the possible result of a double-digit sales tax is too much.

“It could mean losing a possible car deal and a customer,” he said.

Let's say you made $35,000 a year and went to accountant Ben Silver at Kruggel, Lawton & Company to figure your state income tax payment at the current rate.

“Multiplied by the current rate of 3.4 percent, they’d be paying currently $1,190 – so almost $1,200,” Silver said.

But under an income tax scenario of 9 percent?

“An additional $1,960 burden to the taxpayer if they were to eliminate the property tax rates,” said Silver. “Come up with the same amount of dollars, but just in a different method.”

But for State Representative Jackie Walorksi, the state agency's numbers don't hold water.

“Here we go again, with the impossibilities of what can’t happen by scaring people with numbers that flat out do not exist,” Walorski told WSBT News. “There’s not a plan out there that calls for what they are talking about today.”

Walorski said her plan to eliminate property taxes would be phased in, and most importantly would include what she says the state agency's scenarios do not include: a cut in both state and local spending.

“Nobody is willing to address the issue of spending,” she said.

What would she cut? She said the agencies that handle property taxes could be eliminated. But a lot more would need to be cut to avoid a big increase in state sales and income taxes.

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