By Mike Hicks in the Indianapolis Business Journal:
Indiana now enjoys what economists call a “structural surplus” in state tax revenue. This means the several-hundred-million-dollar surplus is a permanent affair when viewed against current expenditures.
It would be astonishing if this did not lead to calls for a tax cut, and so it has. Leaving aside the important question of the optimal level of funding of government, it is useful to better understand the arguments about how taxes are cut, and the risks and benefits involved.
There is a lot of misleading information about our state tax system, which to no surprise seems to bolster one side or the other. For example, our total state and local tax burden is relatively low, and is an economic development advantage.
From the other side, we hear of a study by an advocacy/policy think tank that labels Indiana as suffering among the most regressive state tax systems. I found three fatal errors in their work in about five minutes. There are doubtless more, and we should ignore that study. Quite simply, Indiana has probably the best tax system in its history.
This is not to argue that there are not problems with our tax system. One is that businesses avoid higher tax rates by organizing as limited liability companies. This is why corporate tax collections are plummeting when they should be growing.
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See the full article here:
http://www.ibj.com/hicks-fiscal-prudence-should-be-rewarded-by-tax-cuts/PARAMS/article/40992
