This will be a short article this week, since it is being written in Indianapolis in the evening during a fairly busy time. The Governor's tax bill has now passed out of the House of Representatives, though by the narrowest of margins (51-47). The bill needed 51 votes to pass, and did so only when one Republican, Dean Young, crossed over to support the bill. His reasoning: he supports property tax reform, and the only way to see that occur this year was to get the bill over to the Senate to keep the discussion going. The Democratic majority in the House had been unable to get three of its members to join the other 50 in supporting the Governor's bill. Thus, Rep. Young's vote was necessary for a tax bill to be considered this year. Good or bad, the bill is alive.
It currently contains a 1% increase in the Sales Tax, a tobacco tax increase of approximately 40 cents, and significant increases in business taxes. The bill also deviates from the Governor's plan by proposing major reductions in the property taxes used to support the general operating funds of schools. In addition, the inventory tax would be phased out over time.
There is something for everyone in this bill. That is, everyone but those of us who believe that we used up the State's surplus because of our state government's insatiable spending habits. For the past eight years, the State had been spending at a rate that was well in excess of its revenues. These bad habits could be masked by the surplus, but those days are long gone.
What the Republican controlled Senate is considering is creating a permanent spending cap. I am co-author of Senate Bill 47, which proposes to control future state spending to 1% over the rate of inflation, with adjustments for population growth. Such spending controls would go a long way to curing much of the current budget problems being experienced by the State. I can never understand why some people believe state government shouldn't be held to the same standards as businesses or our families. When times are tough, we tighten the belt and make do with less. And even when the good times are rolling, we still need to keep our spending habits under control by sticking to a prudent budget. Spending caps would make a difference, and must be part of any tax modifications. I will be asking that the language of SB 47 be made a part of the currently proposed tax bill.
As for what the Governor's tax plan will look like in the end, if it survives, no one can say at this time. We still have approximately four weeks left in this year's Session. During that time, much can occur. I'll be reporting back to you in the next article with an update on the current status of the Governor's tax plan.