The holidays are here, and that means we get to watch the great holiday movie, "A Christmas Story." Then we get to watch it again. And again.
We're fine with that, especially here in Indiana. The movie is set in the Hoosier state, and it is based on stories by Indiana's own Jean Shepherd. He narrates the movie, too.
Some of the scenes in "A Christmas Story" come from Shepherd's collection, "In God We Trust: All Others Pay Cash." In the book you'll find stories about Flick, the Red Rider BB gun and the old man's special award.
Read on, though, and you'll come to my favorite - the only humorous story I've ever found about Indiana property taxes. It starts out funny, anyway, but it gets a little dark toward the end. The story is "'Nevermore,' Quoth the Assessor, 'Nevermore….'"
Back in the day, Shepherd wrote, "The Indiana personal property tax was very personal." Household property used to be taxed. The local assessor would tramp through your house, assessing the carpet and the fridge and the radio. Then you'd get a tax bill, which some people paid - and many people didn't.
In the story, the assessor is spotted up the street. The mom whispers to the narrator (presumably Ralphie), "The Assessor! For crying out loud, quick. Unplug the radio! Take it down to the coal bin!" The assessor arrives, and mom tells him that the fridge hardly works and reveals the hole in the rug, usually hidden under the davenport. Ralphie can't understand it. He shouts "No Ma! Ma, it's our refrigerator! It has great ice cubes!"
We amended Indiana's Constitution in the 1960s to eliminate household personal property taxes. Later, we dropped automobiles from the property tax, replacing this with the motor vehicle excise tax. Then, from 2003 to 2007, we phased out property taxes on business inventories. The base of the property tax has been narrowed over the past 50 years. All that's left is land, buildings and business equipment.
One measure of good taxation is whether or not a tax encourages people to do silly things to avoid taxes. There's no reason to hide the radio in the basement except for property taxes. There's no reason to park the car across town, so it won't be spotted when the assessor comes by, except for property taxes.
Indiana auto dealers used to hold February tax sales, to run their inventories down by the March 1 assessment date. We don't see those sales now that the inventory tax is gone. The sales were caused by property taxes, not by dealers' judgments of best business practices.
Now the Indiana General Assembly is likely to consider another narrowing of the property tax base by eliminating taxation of personal property. Almost all personal property is business equipment, like that used in factories, office buildings and utilities. What silly things do businesses do because of Indiana's tax on business equipment? They invest in Illinois and Michigan instead of Indiana, that's what. That's silly from our point of view anyway. Those states do not tax business equipment; so sometimes it's less costly to operate a business there. Indiana may be missing out on investment, growth and jobs because of its business equipment tax.
Eliminating part of the tax base may have economic advantages, but it creates some thorny problems, too. What about the revenue that local governments lose? When the property tax on cars was dropped, the revenue was replaced by another tax. What about the shifts in tax payments from businesses to other taxpayers? When the inventory tax was dropped, counties were allowed to protect homeowners from property tax increases with a credit funded with local income taxes.
As I said, Shepherd's property tax story has a dark ending. The sheriff auctioned off the family household property of one of Ralphie's friends, right on the front lawn, for not paying their taxes.
I'll bet it was a relief to everyone when household personal property was dropped from the tax. Taxpayers no longer had to hide their radios. Sheriffs no longer had to auction very personal property. And it was probably a good thing for assessors, too. If household property were taxed, would you invite the assessor to your house for a holiday dinner?