Sales tax all about fudging numbers

When last we visited Boss Bosco of the Indiana General Assembly, he was sleeping off his eggnog. Today, he is fresh and frisky.

“Over here, son,” he calls in his legisla- tive baritone.

“Boss,” I ask anxiously, “did you bring your spreadsheet showing your plan to return sales tax to Indiana counties?”

“Right here,” has says, unfolding a set of papers. “It’s all here. In 2014, the Indiana Department of Revenue collected $6.3 billion in sales taxes or $953 for each of the 6.6 million Hoosiers.”

“I understand you would allow local governments to raise the sales tax within their jurisdictions,” I say.

“No,” he replies. “Sober, I see it would only increase competition between communities while confusing consumers and businesses. Let’s just increase the state sales tax by a penny and give all that new revenue back to the counties.”

“How much will that be?” I ask.

“Based on the 2014 data from the department of revenue, I estimate $900 million,” he says. “That equals an added $136 per person for local schools and other government services.”

“And how would the money be distributed to each county? By population? By where the dollars are collected?” I push for clarity.

“Yes and yes,” the Boss replies. “But first, you do know all this is subject to getting more accurate data from the department of revenue?”

“What?” I gasp. “We can’t trust the department’s numbers?”

“They do as best they can,” the Boss says, “but they warn us not to take their numbers seriously for any meaningful purpose. That’s because their total of collections in each county accounts for just 53 percent of statewide sales tax collections.

“Our kindly Legislature,” he continues, “still allows firms to send in consolidated reports lumping counties together. Therefore, we don’t know where 47 percent of the sales taxes originate.”

“In this day and age of computers?” I explode.

“My boy,” the Boss calms me, “our beloved General Assembly is not of this day and age, and a few companies of considerable influence may resist detailed reporting for what they claim are ‘competitive reasons.’ “

“All right,” I acknowledge. “Let’s see the results based on the imperfect department of revenue information. Who’s going to get how much of those $900 million?”

“If we give equal weight to population and place of collection, Marion County get $169 million (18.8 percent of the $900 million) and Lake gets $76 million (8.4 percent). See for yourself,” he says.

I look at the spreadsheet. Only 11 Indiana counties have higher percentages of retail sales tax collections than they do percentages of population. In the other 81 counties, population outweighs retail sales.

It’s easy to understand that Vanderburgh County (Evansville) is a shopping center (5.6 percent of sales tax revenue as reported vs. just 2.8 percent of population. But why aren’t Allen, Howard and Johnson counties retail centers? Is it because companies operating in those counties report from headquarters elsewhere in Indiana?

“What will it take to end this gross distortion in the department of revenue data?” I ask.

Boss Bosco just smiles, shrugs his shoulders and walks away.

Morton Marcus is an economist and can be reached at mortonjmarcus@yahoo.com.

Morton Marcus is an economist, writer and speaker who may be reached at mortonjmarcus@yahoo.com.