Scott Tibbs
Published by the Hoosier Project, 12-02-2001

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Grab your wallet and run!

Governor Frank O'Bannon spoke to Indiana residents in an unprecedented statewide television address and, unfortunately for Hoosiers, pushed a plan to balance the budget that will raise taxes dramatically at a time where the state's economy is in a slump.

Tax increases are bad in either good or bad times, because the government should not have the right to indiscriminately confiscate its citizens' wealth at ever increasing rates. Taxes discourage entrepreneurs from expanding business and providing jobs, and give the money to a government bureaucracy that almost never spends as wisely as the people would. In bad economic times, tax hikes are even worse, because money that is needed to revive the sagging economy is instead confiscated from the people.

O'Bannon has proposed raising the state tax on cigarettes by 322% with a fifty cent per pack increase, a move that is projected to raise $430 million in new taxes by 2003. If taxes must be raised (which is not a certainty) why should the burden of fixing the overspending by the O'Bannon administration fall especially hard on one industry? This tax would damage the businesses located along the Indiana-Michigan border that take advantage of the lower Indiana taxes to sell tobacco to Michigan residents who can avoid the higher taxes in their home state. What would O'Bannon say to the employees of these businesses, whose income is threatened by this 322% tax hike? Raising the cigarette tax could also have an adverse effect on lower-income Hoosiers with smoking habits, who will continue to purchase cigarettes even with the higher taxes.

But the poor won't just be impacted by O'Bannon's cigarette tax hike, as the "shelter allowance" in his property tax "reform" will hurt low income Hoosiers. Since this "allowance" is not extended to thousands of rental units all over Indiana, rental properties could see a significant property tax hike with reassessment. Since landlords do not have a money tree to pick off and give to whatever scheme government has just invented, the tax hike will be passed along in the form of higher rent. This simple concept has been explained hundreds of times, but apparently government officials, at any level, just don't get it. Higher property taxes on rental units means that a family living in a rental property will find it even more difficult to save enough to put a down payment on a house and live the American dream. For someone in a party that prides itself on being a defender in the downtrodden, our Democratic Governor sure isn't making it any easier on low-income Hoosiers.

Unfortunately, O'Bannon and some in the state legislature don't just have their sights set on one industry. When a state senator proposed a massive expansion in the state sales tax by applying it to services, the O'Bannon administration indicated it had considered the idea of expanding the sales tax base. This would be a tax increase of $670 million a year for the state.

Ultimately, O'Bannon and the various big spenders in the state legislature must learn that the money they spend is not theirs. That money belongs to the people. If government, through irresponsible spending habits, creates a deficit, they should not simply confiscate more and more money from hard-working Hoosiers to satisfy their compulsive spending. If a family or a business is gong into debt, they do not automatically have the option of getting more money. Instead, they must look at where they can cut their spending, and tighten their belt. Government should learn this lesson, and if it does not, or will not, then the people should use the 2002 elections as a teaching tool.