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Lowering Sales Tax Rate & Eliminating Property Tax?
Posted Friday, September 12, 2008, at 11:57 AM<< Previous | Read comments | Respond | Email link | Next >>
Lawmakers in Indiana are discussing lowering the sales tax rate and eliminating property taxes. Here's the catch though:
They would apply sales tax to services too. By doing so, more tax money could be created, which could actually lower the sales tax rate overall and supplement enough additional monies to eliminate property taxes. So, you could be paying sales tax on everything from your tax preparation invoice to attorney's consultation to doctor's bill for a minor surgery. It's been said that if the legislature says, "We have a tax deal for you!" that you better run away as quickly as you can. Listening to the sirens can pull you in and make your tax situation worse in the end; however, it would make the tax system more of a "consumption tax" rather than a property tax system. As I've posted before (click here: http://gcdailyworld.com/blogs/chriswathe... ), if you think you own property just skip a few property tax payments and see what happens. Taxing services (along with goods as is the case now) with an overall lower sales tax rate and potentially eliminating property taxes: good or bad? What do you think? Would a consumption tax be more appealing? And what other ramifications will come with it? For example, it seems even more accountants will be needed to keep track of the service-based businesses that have never had to track sales tax before. Given the demand for accountants is already very high since accounting standards have been increased in the wake of the WorldCom & Enron scandals, combined with the fact that the education requirements for CPAs have increased in the last 8 years or so, will that drive accountant scarcity to new highs? Comments Showing comments in chronological order [Show most recent comments first] |
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Caveat: I am not an economics major:
I think taxing services would be fair.
It will tax more on the people who can afford it, rather than those who cannot.
The poor usually don't purchase a lot of professional services (because they're poor). The do, on the other hand, usually buy a large amount of goods (taxable food, clothes, other semi-necessities) and own taxable land.
I don't use a dry cleaner, accountant, or a landscaper; I do use washing detergent, calculators, and mow my own lawn. Why is it fair that I pay taxes on these things, but not when people use these things for me? It's just silly.
It's very unlikely to cut in to the bottom line of service based businesses, especially around here. If anything, in my theory, it could help them by freeing up a large amount of money that people could now use on other things, including services. Current customers of the service industry use them because they either need them or can afford the luxury of having them--an extra few percent tacked on (especially if you know that it's going to help build a new school, fund some literacy, or even fix a pot hole) will do little to no damage.
Let's just hope the state wouldn't screw this up like most everything else they seem to touch anymore.
How can one say this politely? Our property tax system stinks!
It is not unusual to find virtually identical properties, both parcels and improvements, assessed and taxed differently on the same block. Stop in the courthouse and look at the assessments in your neighborhood, or your rural area of the county. Assessments are public information and they will surprise you.
Now, across the state, counties are hiring companies to do the work previously done by township assessors, only now we're calling it "trending" and reassessment. Nearly every county must do this. There cannot be that many qualified companies, (perhaps explaining the lack of bids for the work for Greene County,) so the quality of this work will be suspect from the start.
In the past, assessors, and the rules under which they operated, changed many times, sometimes even in the midst of reassessing individual neighborhoods. This led to more unfairness in the process.
Individuals with knowledge of the system and the courage to take action have always been able to appeal their assessments, but what number have? And is *that* a fair way to do things?
Finally, what does your assessed value really mean? Once a taxing district's total assessed value is set, only then is the district's tax *rate* set to attempt to equal the revenue requirement of the district (county, school, library, sewer, etc). Each district's rates were added together. This total rate was then multiplied by one's assessment to arrive at the tax bill. This is why one's tax bill will change from year to year even without a reassessment of one's property.
Under the new law, the total assessment is capped based on whether a person or a business owns a given property. But the tax *rate* is still determined the same way, by the financial needs of all the districts related to a given property.
By eliminating the property tax altogether, we eliminate all the unfairness.
My "two cents worth:"
Go for it! Increase the expenses that will have a sales tax attached to "pay for" the elimination of property taxes.
Maybe then I'll be able to offer three or even four cents worth of opinion. :)
per moenia urbis: I couldn't have said it any better.
You say lets tax services? That means you will pay 6 or 7 percent more for medical services as well. Our medical costs are already outragous. That is one of the leading cause of bankruptcy. The people you talk about actually needing that money will be hurt more by sales tax on services. Add 6 to 7 percent to every haircut, every lawyer visit, every doctor bill. It will not help the average person at all.
Less people will be able to afford the services, thats all and therefore more bankruptcy and dependacy on government services.
Answer me this, how are you going to pay less actual tax when they do not cut spending. The money has to come from somewhere. One pocket or the other, they are going to get it. Cut spending, then taxes will come down.
Taxing services will be extremely hard to enforce. If services are taxed, then all one needs to do is pay in cash. No checks, credit card, etc means no tax.
I think inside the walls of the town put it best by saying that the rich use services while the poor cannot afford them, lets tax the rich for their consumption. Also, why can't taxes on medical services be exempted the same way you are not taxed on groceries?
Taxing services - now there's another good reason for jobs to leave the state. Why would anyone move a business to Indiana if they're gonna get taxed to death ??
I don't think taxing services are going to make a lick of difference whether someone moves to Indiana or not. A, a business that could move anywhere it wanted in the country probably isn't performing services but more likely manufacturing products.
Businesses that provide services that would be taxes (tire changing, lawn mowing, skating rinks, etc) go where there is a market for their service. They can be like "I won't build in Indiana because they will tax my services" but someone else will be like "Hey, Small Town, Indiana needs a new bowling alley and I may be taxed to provide that service but their is a market to make money so I will do it."
Its all in the entrepreneur/manager mindset. Businesses will go where they can make money, if we keep buying Chinese products which are made for less, companies will keep moving there to make their products...as long as you shop at BigBox-Mart forget having a job except at a service based business...hum maybe thats what the 21st Century will define itself as like the 20th Century defined itself as manufacturing with the Industrial Revolution. Maybe 20 years we will look back and call this the "Services Revolution".
Most "POOR" people don't own property, they rent. By taxing services, we all lose. What's next, taxing food, medicine, etc.??? Getting your meds require the Service of the Pharmacist. Getting your groceries requires the Service of: the people who stock the store, the people who clean the store, the cashiers the ring up the goods...will we have to pay for 3 services each time we go to the store?? I don't buy into Mitch's plan. It can only hurt the ones who can least afford it.
Well let's see what services a manufacturing business uses... equipment repair and maintenance, trucking, independent contractors, engineering services, etc. A manufacturer does not keep employees on the payroll to perform every task needed. It's naive to think taxing services won't have a huge impact on attracting new business.
Following the logic on this blog, would a company looking to locate in Indiana be more concerned with high property taxes or service-based taxation? Indiana eliminated the inventory tax, which is what caused some of the current money flow problems.
So, is it better for potential investing companies to rent and avoid direct property taxation? Or is it better to have to pay an additional tax on services.
Interesting question. Think about large shipping companies, who might like Indiana for its location in the center of the US, and that they would have to pay a tax on every tire fillup, tire capping, engine overhaul, oil change, etc. on their 18 wheelers. Is that cost prohibitive for them?
Can anyone add some help to this quandry?
Service businesses such as trucking, airlines, and air freight will get a double wammy. They will be required to collect taxes from their own customers for the services rendered. And will be required to pay taxes on services just to be in business. These businesses are already running on a low profit margin, now this service tax will consume their profit and will run them out of business. Obviously they will move to another state and avoid the tax altogether.
They are going to get your money somehow. You can't cut taxes without cutting spending. This would hurt more than people think. We all rely on services. This may help the elderly, but it would hurt young families. I'll use my property tax break to pay the tax on Daycare.
Of course, Mitch will get a great clip for his future campaigns. Indiana...no property tax. Sorta like the all day Kindergarten. He funds a few schools, then acts like he has it throughout the state.
Have you ever stopped to notice that the rich get richer and the poor are getting poorer? Now the lower middle class is sliding into the poor category too, before long there will not be a middle class, only rich and poor!