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I just paid a 7% tax on a non-fast food ham sandwich. My wife didn't believe me until I showed her the receipt.

As of April 1, 2008 the Indiana sales tax increased from 6% to 7% - while homeowner property taxes were capped at one percent of a home’s assessed value, apartments and agriculture land were capped at two percent of assessed value, and business property were capped at three percent of assessed value. These measures were the heart of a two-tiered tax restructuring plan that was passed by the Indiana State House and Senate and signed by Governor Mitch Daniels in 2008. In a state that voted for a Democratic presidential candidate for the first time since 1964, legislative and executive politicians have somehow arrived at the conclusion that rewarding the rich while oppressing the poor makes for good public policy.

This flies in the face of mounds of research that indicates that sales and other consumption taxes place a heavy burden on the low and middle-income classes. The regressive nature of consumption taxes is well documented. Howard Chernick and Andrew Reschovsky, writing for Challenge in 2000 (Vol. 43), expound upon the inequity of the consumption tax. Both authors point out, "In a study of school finance in Michigan, a well-known economist observes that the sales tax is "somewhat regressive with respect to current income and approximately proportional with respect to lifetime income" (Courant and Loeb 1997, 122-123). Moreover, this conclusion is "relatively uncontroversial." This statement represents a fair representation of the conventional economic wisdom on this topic today. Twenty years ago most economists would have emphasized the regressivity of taxes on consumption. In this article, we argue that the "new view" of tax regressivity is built on shaky empirical foundations, and that more systematic evidence shows that regressivity of consumption taxes is still important, whatever the time horizon." (Chernick & Reschovsky, 2000)

These inequitable policies couldn’t have been enacted at a worse time for the working class. Bernstein et al wrote, "Between 2000 and 2006, the average income of the lowest fifth is down 4.5%, the middle fifth is down 2.5%, and only the top fifth is up, by 1%.  Similarly, today’s report revealed that the share of income going to the top fifth of households was 50.5%, the highest share on record going back to 1967.  The middle-income share was 14.5%, the lowest on record.  The bottom income share has been 3.4% since 2003, also an historic low." (Bernstein et al, 2007). These economic numbers for the working class can be best displayed via the following graph, courtesy of data derived from The United States Census Bureau:

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*Source: http://www.epi.org/...

So, at a time when median family income for every income class except the highest has decreased, the State of Indiana sees fit to toss a healthy property tax cut toward the wealthy – while at the same time passing an unnecessary burden on to those who can afford it the least. And the outrage doesn’t stop with the sales tax. Increases in registration, driver’s license, and other mandated fees have also hit the working poor like a ton of bricks. In addition, most Indiana counties have assessed "wheel tax" fees of $25-50 per vehicle – bringing the aggregate cost to renew license plate tags to over $100 for a used vehicle 10 or more years old.

Citizens of The Hoosier State, this is what we face as a result of voting Mitch Daniels (R) back to the governor’s mansion last November. This guy pulled off this inequitable magic act with a majority backing from the state legislature. Now, he wants to write this garbage into the Indiana State Constitution. Thus far, it has primarily been Democratic House Speaker B. Patrick Bauer who has kept this atrocity from becoming a part of our state’s constitution. Let’s show House Speaker Bauer that we stand by his support for the working class by dropping him a line and/or message. He can be contacted at:

1-800-382-9842
H6@in.gov

I also urge you to contact your state representatives and senators and tell them to support public policies that close the disparity gap, not widen it.

References

Chernick, H., & Reschovsky, A. (2000). Yes! Consumption Taxes Are Regressive. Challenge, 43(5), 60.

Bernstein, Jared. Median income rose as did poverty in 2007. Economic Policy Institute, 2007.

Originally posted to Democratic Tribune on Thu Apr 23, 2009 at 08:49 AM PDT.

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