“Take from the working poor, give to the affluent and preserve the political peace.”
Any elected official, Republican or Democrat, would tell you the above stance isn’t likely to win you many votes in an election. Amazingly enough, however, this is exactly the stance those who oppose the elimination of the Homestead Tax Credit subsidy are taking. What’s even more remarkable is that many of them don’t even realize it.
Much has been said about the Homestead Tax Credit subsidy over the last three years. What’s most troubling, however, is what continues to be ignored – The Homestead Tax Credit subsidy is a regressive tax that takes from the working poor and uses that money to pay the property taxes of those fortunate enough to own a home.
Let’s start at the beginning. If you live in Indy and work in Indy, you pay local income taxes in Indy regardless of how you live – teenager at home, renter, subsidized housing, crashing on a friend’s couch, etc. Those income taxes go to the city. Once there the city makes the determination on how to spend that money. Currently, and against the mayor’s recommendation for the last three years, the Council chose to take some of that money and fund the Homestead Tax Credit subsidy. In other words, they take your income tax dollars and use it to buy down the property tax bills of homeowners. That’s right, only a select group of people, homeowners, get the financial benefit of the labor done by all.
What’s worse is that in the new era of constitutional property tax caps, not even every homeowner benefits from the subsidy. Instead only those homeowners whose tax bills are under the 1 percent cap see a financial benefit. Currently 46 percent of homeowners are above the cap, so only 54 percent would see any financial gain. Moreover, of those 54 percent the vast majorities are located in areas of high-assessed value and lower township taxes. In other words, the grander homes of the north side reap a disproportionate share of the subsidy provided by all of Indy’s workers.
Critics are quick to ignore this fact and instead focus on what happens if the subsidy is eliminated. The answer is clear. Yes, those 54 percent of homeowners reaping a financial benefit for all our labor will see that benefit go away and with it, they will pay their full property tax bill. But isn’t that fair? Taking that benefit away, however, scares politicians and thus after three years, the Council has failed to act.
Now is not the time to fear consequences because they are hard to explain and therefore unpopular. Rather, now is the time to put good policy ahead of shaky politics. Now is the time to ask the question should we do this in the first place, not what happens if we change our practice. Should income taxes go to fund preschool and public safety or should they go to pay down the property taxes of 54 percent of Indy homeowners?
The answer is obvious. It is past time to quit taxing the working poor in order to provide a tax benefit to those fortunate enough to own a home. We all already pay the tax; the question is how should the city spend that money. I say we fund those issues we can all agree need our attention, early childhood education and public safety and stop paying the property tax bills of others.
Ryan Vaughn is chief of staff for Mayor Greg Ballard.
