Rightwing Gunhugging Bloodsuckers - Study: Urban tax money subsidizes rural counties

[Gerald Davis]

Study: Urban tax money subsidizes rural counties

A study released Tuesday morning by the Indiana Fiscal Policy Institute
shows residents in metropolitan counties subsidize their rural
counterparts by paying more in state taxes than they receive in benefits.

While the results may not be unexpected, they demonstrate for the first
time in Indiana the disparity in state tax collections and distributions
among urban and rural counties, IFPI President John Ketzenberger said.

“The outcome is not surprising, but it does show what has long been
suspected,” he said. “And there’s some value in that.”

Overall, taxpayers in 46 metropolitan counties paid 82.5 percent of the
taxes, or $11.3 billion, and received 76.7 percent, or $10.5 billion in
expenditures, the study said.

The disparity is equally pronounced in the 10-county Indianapolis
metropolitan area. Residents there paid 33.5 percent, or $4.6 billion, of
total state taxes and received 28 percent, or $3.8 billion, back.

Still, William J. Rieber, an economics professor at Butler University’s
College of Business, said the method in which states distribute tax
dollars is justified.

“Rural areas don’t have the same infrastructure as urban areas do, so they
often need additional help,” Rieber said. “To some extent, we’re in the
same state, and we’re all in this together.”

The Indiana study is consistent with the results from other states that
examined the distribution of state government finances, the fiscal policy
institute said in its report.

Steuben, Kosciusko, Adams and Dubois are the only non-urban counties that
collected more tax revenue than they got back from the state.

Steuben County in northeast Indiana is bordered by Michigan and Ohio, two
states that have higher gasoline and cigarette taxes than Indiana. As a
result, the county collects a larger share of cigarette and gasoline tax
revenue.

“You often hear in the Legislature about raising the cigarette tax and the
gas tax,” Ketzenberger said. “Some people will say that will hurt border
counties, and this bears this out a bit.”

Kosciusko, Adams and Dubois counties have a large number of residents
working in a metropolitan area with relatively high household incomes and
therefore paid more taxes than other rural areas, the study said.

On a per-capita basis, residents of Vanderburgh County in southwestern
Indiana paid the most in state taxes when compared to expenditures, while
Cass County in the north-central part of the state received the most
benefits.

In fiscal 2014, which ended June 30, Indiana collected about $25.5 billion
in total state revenue, of which it allocated $13.7 billion to the 92
counties.

State taxes accounted for roughly 55 percent of Indiana’s revenue in the
fiscal year, followed by federal aid at 34 percent, and various state fees
at 11 percent.

The sales tax is the largest source of state revenue and generated $6.2
billion in the fiscal year. Individual income taxes, which generated $4.3
billion, were the next largest source. Gasoline and other fuel taxes
accounted for almost $800 million.

Indiana allocates spending of tax revenue through roughly 550 separate
funds, ranging from K-12 education spending ($4.6 billion) to the
preservation and display of the state’s Civil War battle flags ($38,000).

The Ball State University Center for Business and Economic Research
compiled the results for the study.