Indiana Statute states that the homestead exemption given to home owners by the state will end within five years. In addition, the state has given local government a deadline of December 2007 to go to income taxes as an alternative for supporting their yearly budget without the state's homestead exemption intervention.
In a recent column by Frank Gray, Gray wrote that the homestead exemption reduced some homeowners' tax liability by half. So, then when the exemption is fazed out that's afforded by our state, local property taxes will increase.
If the state is no longer buffering local government's greed with the homestead exemption, local property taxes will increase. Local government understands this that is why we have an artificial increase in property values through trending this year, that is outrageous. Who would trust the auditor's department input about income taxes that has supported the increases in your property taxes since 2002? Who?
Second, the state understood the greed of local government and placed a circuit breaker to go in place to limit how much local government could collect after the homestead exemption is eliminated. This point appears to be missing in the debate about going from property tax to income tax and or sale tax to support our local budget.
Either way, the tax dollars will still come out of the taxpayer's pocket. But which way will be fairer, property taxes, income taxes, sales taxes or what?
The fairness issue arises when property taxes are not determined from property wealth. The property wealth theory of taxing property, a home is taxed based on its market value is not working under the control of local assessors. We know that the local assessing officials have high jacked the process of assessing property, by raising or lowering the market values of homes arbitrarily. Which means in many cases home owners are not playing the true tax value of their property. Unfair. Our Constitutional lovers understand our constitution addresses fairness in taxation.
So, if local government went to income taxes, folks can't lie about their earnings in the same way assessors lie about a property worth. Because every year a wage earners has to report their wages to the Internal Revenue Service. IRS, does not take to kindly to folks who like to manipulate numbers. Matter a fact, the employer reports your earning to the IRS. And if that employer lies, unlike the assessor, some criminal action can be taken against that employer.
But here's the thing. The problem is, folks don't want other folks knowing how much they are earning. That's it in a nutshell. Fort Wayne folks don't want folks knowing their business. Now these same folks don't care if their home value is inflated !! But, trying going up to them and ask them how much do you make in a year? That's a problem. So, let's let the government step in, the state and the federal. Because, you do know you will have to give an accounting to not just your state but your federal government also.
Yep, folks have been lying to the state about property worth, now let's see them trying this with Uncle Sam.
We know that a rich person's home is devalued to reduce his or her tax responsibility while a poor person's asset increases for taxing purposes to offset the differences. However, Uncle Sam wants to know your true value, cash flow. So rich folks will pay Uncle Sam or Uncle Sam will come and take everything you own including that home that was not properly assessed by those assessing officials in the first place. Fairness.
That's the issue, fairness.
Either way it goes, taxes are going to come out of the tax payer's pocket reducing his or her paycheck. However, the income tax method is incremental payments where as the current system collects the lump sum twice a year under an arbitrarily valuation system.
There are other advantages to income tax and or sales tax especially with the circuit breaker being introduced that will help reduce the burden of the more wealthy taxpayer. Few folks are able to crunch the numbers. but some are.
Fairness.
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