Another dispatch from the field by Libertarian correspondent Mike Sylvester:
I am going to study Indiana's tax code in more detail in the next few weeks. As many of you know, my wife is a local CPA. She is going to help me.
We need to simplify Indiana's tax code. There are four things I think we should try to accomplish by changing the Indiana tax code.
1. We need to simplify property taxes, and we need to lower them. I think property taxes should be capped at 1 percent of assessed value for residential property. All exemptions should be removed; they just confuse the issue. I am not sure what to do with commercial and farm property yet.
2. We need to completely eliminate personal property taxes. Personal property taxes are taxes that business owners pay on property they use for their business. For example, let's say you are a Realtor. You buy a desk for your business. You, of course, pay sales tax when you buy it. You pay tax on your business income each year. And then you pay personal property taxes for each item you purchase for the first several years you own it. This is absurd.
Another problem with personal property taxes is the fact that business owners have to fill out a FOUR-page form each year. This is excessive paperwork. Large businesses can always file for tax abatements so they get out of paying some of this tax...
3. We need to seriously look at the tax-abatement system. It is completely unfair to small businesses. Large businesses can often qualify for tax abatements. They fill out the needed form and submit it to local authorities. The local authorities almost always vote to approve the tax abatement.
Currently, businesses can file for both personal property tax abatements and property tax abatements. I have talked to local officials, and if you are not applying for abatements on property worth at least $125,000 you are wasting money. There are filing fees, and you will need to dedicate a lot of time or hire a CPA or lawyer to assist you. In other words, this abatement will NOT help most small businesses.
Another problem with tax abatements is that they RAISE other people's taxes. When local authorities allow one business to pay less in taxes, they have to raise everyone else's taxes to compensate.
4. We need to change the states tax structure so that local governments directly get more of the money. Currently the state pays a sum to each locality to "subsidize" our property taxes. This is absurd. We would be better of if each locality collected more of its own taxes and completely removed the state from the process.
I have to do a lot of reseach to come up with a simple tax structure that is revenue-neutral. I want a simple system. This would allow is to downsize local and state governments if we choose taxes that are simple to interpret and collect.
I would add only one thing to Mike's comments: Why be committed to "revenue-neutral"? I know that's a way to make the politicians rest easier. But I don't like the embedded assumption that the amount they're spending now is what we have to live with forever.
Comments
Mike Sylvester would be doing a great service even if all he did was simplify the tax system, even if he can't propose a fix(but I hope he can and think he will). I suspect that many aspiring entrepreneurs get very discouraged when they can't comprehend tax law (and all the other regulation they are walking into). It is ridiculous to have to hire an attorney to explain the law to you.
The complexity of the rules and regulations are ridiculous. I agree with Jeannette that many would-be entrepreneurs probably get discouraged. By forcing small business owners to hire attorneys and accountants, the government has effectively removed the bottom rung from the entrepreneurial ladder.
With all that said the government is shooting their selves in the foot. Making it hard for entrepreneurs to succeed means less economic growth, less jobs, and less revenue. Lets wake up. Does this cycle sound familiar with anything else in our lives that the government has their hands in?
Taxes should be revenue neutral (if I correctly understand the comment). Government should only confiscate the funds necessary to do the job, ie, not post a "Profit". Furthermore, many of us (if not most of us) pay for far more government services than we directly take advantage of, or benefit from. If more services were "User Funded", the expense of various activities would be borne by those using the services.
As a small businessperson, I find it ridiculous how often I must confer with both legal counsel and tax/accounting counsel merely to remain complaint with regulations and proceedings that are incomprehensible to those who are regulated by such regulations.