Not done with property taxes

September 11, 2008

Some intriguing ideas on taxes were presented to an interim study committee of the General Assembly this week:

Under one plan, the state’s 7 percent sales tax rate would be lowered to 5.5 percent and be applied to all services except medical and legal. Young and Waltz said that would raise enough money to replace $2.2 billion in property taxes that homeowners pay.

Of more than 160 services, Indiana applies the sales tax to only 23, including cable and satellite television, utilities, and some phone services. Under the Young and Waltz plans, a lower sales tax rate would be applied to almost all other services, including such things as haircuts, dry cleaning and auto repairs.

Under the second plan, the sales tax rate would be lowered from 7 percent to 4.5 percent and be expanded to all services, including medical and legal. Young said that also would bring in $2.2 billion that could be used to eliminate property taxes on homeowners.

Reducing the sales tax to 4.5. percent or 5.5. percent would make us more competitive with surrounding states in border areas. And the broader the base is for any tax, the less burden there is on individual taxpayers.

I think I like the idea of using the revenue to significantly lower property taxes both for homeowners and business better than the idea of using it to eliminate homeowner taxes altogether. This would be healthier for small companies — especially ones that would have to start collecting sales taxes on their services and might see a decline in business because of it.

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2 Responses to “Not done with property taxes”

  1. Sue Says:

    So if a tax was added to medical services, would insurance pay it? Could open up another whole can of worms.

  2. Sue Says:

    Another thought–what would the tax liability be on, oh say, a cancer or heart surgery and follow up hospital stay?


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