Goshen News, Goshen, IN

March 25, 2014

MORTON MARCUS: Business tax compromise pits counties against each other


Goshen News

---- — Who should be in charge? Governments or private entities? If government, should it be the feds, the states or the locals? What level of government, if any, should control transportation, education, health care, libraries and almost anything else you can imagine?

Hoosiers and all Americans have problems answering these questions. Economists often say that where the actions of one entity result in significant effects on others (externalities), control should go to a larger unit.

What happens in one library district probably has little impact on the neighboring district. Libraries are considered purely local and not all Indiana communities have libraries. Some people, however, believe there are lower costs of service in larger systems (economies of scale) and urge the adoption of county-wide or regional library districts.

Transportation involves many consequences for land owners, businesses and households. That’s why major decisions about transportation are national (interstate highways) with minor adjustments by states and localities.

Bridges across the Ohio River at Louisville and Evansville involve national as well as local traffic flows. The proposed Illiana Expressway, connecting I-65 in northwest Indiana with I-55 in Illinois, involves decisions about traffic and the environment for major corridors in the Chicago area.

Education has been a state concern and a local responsibility. In most places, the job done by schools has not met our aspirations. Unlike highways, schools have not been held to high professional standards. Now with Common Core as a national standard, Indiana asserts it measures performance better than the feds.

Should education, traditionally financed by localities, be run and financed by the state? That’s the Indiana trend. Or should there be a major infusion of federal funds along with federal standards?

Most folks argue schools should meet the expectations of parents and be locally controlled to meet local values. Others question parental aspirations and the validity of local values.

There seems to be no evidence that either bigger or smaller schools are better. In that case, the running of schools could be left to local operators, as McDonald’s franchise holders run their local restaurants under a national, company policy.

What about taxes? Are old patterns of taxation now obsolete? Indiana’s Legislature could not decide. The recently-ended session declared business personal property taxes (which are local taxes) should be eliminated in whole or in part. Not, however, before the next session of the Legislature, after the next round of elections, and the next opportunity to raise more campaign contributions from interested businesses.

As it stands, the decisions on business personal property taxes are going to be made by county leaders. This pits one county against another in the ever-changing fight for private investment.

Of course, if there are no business personal property tax revenues, there is less reason to fight for local investment and to provide development incentives. More jobs in your community might be a nuisance and a cost to local government paid for by higher income/property taxes on local residents.

It might surprise some wizards in our Legislature that they have passed a law that could work against economic development.

Morton Marcus is an economist, writer and speaker who may be reached at mortonjmarcus@yahoo.com.