Beware of unintended consequences (01/31/08)

Someone once compared tax policy to those complicated mobiles created by the artist Alexander Calder.

A Calder mobile, typically something huge hanging in a public space, was perfectly balanced.

It could be made of a dozen or more pieces, but if you moved one piece another part of the mobile moved as well. Take away one piece, and the whole thing would fall into a jumble because of the imbalance. That image has kept coming to mind over the past few weeks as the Indiana General Assembly, legislative toolbelts strapped on, has set about to overhaul the financing of local government and schools in the Hoosier state.

And we can't shake the thought that these folks really don't know what they're doing.

Every time they tinker with one part of the system, another part is affected. But the tinkerers don't seem aware of the impact of what they're doing.

In some ways, it's reminiscent of the decision a few years ago to do away with the inventory tax. That decision, in and of itself, may have made sense; at the very least, there was a solid argument in its favor.

But when that change was made, it was as if it had been done in a vacuum. There was no serious discussion of how elimination of the inventory tax would shift tax burdens onto other shoulders.

Now we're looking at the potential for numerous changes and shifts, all with only the fuzziest of forecasts in the crystal ball as to what those multiple changes will mean.

Put a cap on homeowners' property taxes? Okay, but who will pay more to pick up the slack? And what will the impact be if business and industry are hard hit?

Move school general fund revenues from property taxes to sales taxes? Okay, but what's the likely impact of moving to a more regressive form of taxation?

Eliminate property taxes altogether? Okay, but what do you do about government bond issues already in place that stretch years into the future?

You get the picture. You can't move one part of the tax policy mobile without making some other piece of the mobile move as well.

It's a complicated problem, and during a short legislative session and an election year, there's little reason for optimism that it will be handled well. - J.R.

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