Governor Mitch Daniels weighs in on option tax debate

The man who started Indiana’s property tax reform movement has some advice for local governments--trying to live with it.

Governor Mitch Daniels realizes that the property tax reform package will hit harder in St. Joseph County—in terms of lost revenue to government—than in most other places.

Still, the governor says his sympathies remain with the taxpayer.

To Daniels, property tax reform looks as good at the tax payment window as it did on paper.

On the average, bills are down nearly 40-percent.

“Coming along when it did, cutting people's mortgages very directly and immediately, it’s come at a good time,” said Daniels. “At a time when people are stretched and pinched some people even on the brink of foreclosure undoubtedly have been protected by this reform.”

But bringing pleasure to taxpayer has brought plenty of pain to local governments who lost property tax revenues in the process.

In St. Joseph County the talk has turned to increasing local income taxes to make up for millions lost to property tax caps.

“It’s not the only option,” said Governor Daniels. “They always have the option to send less money, I know this would be a completely unnatural act for some of those folks, but you know that should be the first option.”

The harsh advice comes from a man who feels he not only talks the talk, but walks the walk. The governor says he has set the example by cutting spending at the state level.

“Most of Indiana government is operating at much lower expense than it is in South Bend or St. Joe County, and yes there will be adjustments, if for decades, generations, you over tax people. (If you) had more government than is really necessary.”

The governor did appear to be somewhat supportive of a local preference to tax tourists, instead of locals who earn income.

Some in local government have resolved to lobby state lawmakers for the right to increase the hotel/motel tax, or to impose a food and beverage tax to offset circuit breaker losses.

“Up to some point I’d be interested in that, if that flexibility is involving more taxes I’d probably be interested in making sure the citizens have some say in that,” said Daniels.

The governor did point to a state report showing that South Bend had a $47-million unreserved fund balance at the end of 2007. The report noted that the balance was two to three times larger than experts recommend.

The unreserved balance in the general fund alone was listed at $21.5 million, representing 37-percent of total city expenditures.

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