Vermont, Indiana 
By Martin Harris

There’s a little bit of Vermont in central Indiana, in the shape of an unincorporated crossroads settlement in Howard County just east of Kokomo. The then-new Midwestern village of Vermont was built in then-old-growth wilderness by cutting down trees and commencing in agriculture; it was settled by Yankees fleeing their former home-State in the pre-Civil War decades, pursuing (as today’s flee-ers are doing) better economic opportunity elsewhere, then in the form of deeper topsoil and flatter, stone-free land, now in the form of less governmental hostility to business, better jobs, and lower taxes. Just as much of the trans-Appalachian Upper South was settled by Scotch-Irish escapees from the "Tidewater" Old South (and their descendants’ outlook on the role of government is recognizeably similar) so too the Yankees who opened the near Midwest carried in their genes concepts of "…frequent adherence to principles of frugality…" (read it for yourself in the Vermont Constitution) and perhaps it’s that inherited mind-set which explains why Indiana’s voters have just forced an addition of property-tax caps into their State Constitution.

Maybe it also explains why, now that such Yankee DNA is pretty much gone from Vermont, any such property-tax-cap notion would receive short shrift indeed from today’s Golden Dome population. And maybe it also explains why Mary Adams, who successfully led a grassroots rebellion to repeal Maine’s statewide property tax in the mid-1970’s before such recent flight had begun there, was unable to succeed with a 2006 referendum effort to enact a Taxpayers’ Bill of Rights in the "new" Maine.

Now, in Indiana (and that includes the "new" Vermont") residential property taxes will be capped at 1% of assessed valuation, 2% for rental and farms, and 3% for commercial properties. If you were paying attention at the time of the first Statewide tax rebellion, led in California by Howard Jarvis via Proposition 13 in 1978, you know that there all such taxes were capped at 1% of value and no more than a 2% (if inflation-justified) annual increase thereafter. Indiana’s rulers have decided to respond by raising sales taxes and fees. As befits an opinion column, here’s my opinion. It starts with the unavoidable fact that there are tax-plusses and tax-minusses on the land-use rolls: those which demand more in services than they pay in taxes, like most residential properties; and those which demand less, like all farmland and some residential.

On the Jack Kemp principle that "whatever you tax you get less of" and on the Adam Smith principle describing how purchasers willingly pay for goods and services they want, I’d argue that sales taxes and user fees are better for the economy than income and property taxes. If the political class wants more savings and property ownership as its members claim, they shouldn’t want to tax such holdings. If they want more competition among vendors, as they claim with health care, they should welcome the same for education. Slowly they’re accepting the concept of user fees for such services as highways (including congestion-pricing) and therefore they shouldn’t be resisting such concepts as full-cost pricing for, say, food buyers and at least partial-cost pricing for, say, public education buyers. Which, historically, was once standard Vermont (the old Vermont, not the new one) practice in the Civil-War-era for raising the funds needed to operate public schools: the "rate bill", whereby families paid a part of the teachers’ salaries but not a part of building construction or maintenance costs, pro rated in accordance with the numbers of children they sent to be educated.

The failed 2006 Mary Adams effort at tax caps in Maine used examples of empty-nesters being forced to sell and leave Maine because of soaring education costs and taxes even though they no longer send kids to school, her underlying principle being one of (at least partial) user fees, and that therefore those who have long since paid their own costs shouldn’t be taxed to subsidize others. Incidentally, that used to be the principle behind bridge tolls which ended when the construction bond issue was paid off. The new Vermont –indeed, all of Indiana— rejected that principle for both transportation and education, and has just experienced a grass-roots rebellion. The old Vermont addressed the question with an income-sensitivity provision for school taxes, thereby relieving some from any responsibility at all and loading others with their avoided obligation. What soon happens under that formulation is well described in a recent news report in a local New Jersey newspaper, the Conservative Examiner. The headline summary is all you need: "New Jersey’s Richest Citizens Flee Its Taxes". As in the old Vermont, that upper-income-taxpayer flight is denied by tax-shifting, anti-user-fee advocates in New Jersey.

These are the same Golden Dome folks in Montpelier who have chosen, under the Jack Kemp principle, to reduce middle-income resistance to their governance by upping middle-class taxes so as to reduce the middle-class presence: "whatever you tax, you get less of". It has worked; it always does. If it works too well, the Old Vermont may next have the New Jersey problem: upper-income-taxpayer flight. There’s some evidence that it’s already started. Ask Golden Dome tax advisor Rick Wolfish on such departures.

Old Vermont, its governance now dominated by sustainability, local-vore, and self-sufficiency advocates might want to consider a sales tax on services to replace, not add onto, income taxes.

For example, a tax on tax prep services might encourage more of the minority who actually pay taxes to do-it-themselves, and that form-filling experience might encourage them to Tea Party for consumption taxes where no forms are needed. Or they might be encouraged to learn how to do their own plumbing, a logical progression from growing your own food.

Martin Harris is a former Chairman of Citizens for Property Rights