STATEHOUSE DISPATCH: Tax talk begins to make Republican lawmakers hinky

Perhaps the most surprising aspect of this session’s first five weeks has been all the talk about imposing or raising taxes.

A surfeit of Republicans ran for assorted offices last year complaining about the condition of the state budget, but pledged to bring it back into balance by attacking fraud and waste, and simply cutting more programs. Many Democrats who ran against them acknowledged budget “issues,” but suggested they could be managed and the budget would not be balanced on the backs of the poor and working class.

And while the numbers weren’t really much different in January than they were last fall (and, in fact, one could argue revenue collections were much improved over forecasts), tax talk began almost immediately in the limestone halls of the Statehouse.

No one truly expected that in Republican Gov. Mitch Daniels’ first week he would propose a tax increase, even in the form of a surtax on “the most fortunate among us.” But that was only the most conspicuous such call.

Throughout January and early February, tax-hike talk had insinuated itself into many discussions and lawmakers generally seemed to have no problems with the concept.

Initially, the talk centered on affording flexibility to local governments. Legislators considered measures that would provide more freedom to assorted jurisdictions to tax and spend in exchange for some trade-offs, such as forcing the local units to give up certain state subsidies and for local leaders to take the heat for raising the taxes.

The concepts were welcomed by local government leaders as fulfilling the longcherished-but unevenly applied-concept of home rule. And because the leaders would be given the ability to control their respective destinies without many of the constraints the state imposes on them with the acceptance of certain funds.

There was also an effort pushed by local governments to allow each town, city and county to impose local food and beverage taxes, again providing local governments with the fiscal tools they need to survive in the current environment. While the hospitality industry fought the prospect of such widespread taxes, the idea gained steam.

Then there was the Colts stadium and Indiana Convention Center expansion.

Indianapolis Mayor Bart Peterson, a Democrat, called the bluff of lawmakers as the session was preparing to convene by offering a plan to finance the projects largely through revenue from expanded gambling, with a sprinkling of assorted tax increases that would largely avoid hitting local residents.

While there was a quiet undercurrent of admiration among lawmakers for Peterson’s derring-do and his avoidance of general tax increases, it was difficult for many of them not from the counties that would be most helped by the expansion of gambling to back the plan.

Rep. Jeff Espich, R-Uniondale, the veteran chairman of the House Ways and Means Committee, then surprised even many of his own Republican colleagues by serving up a litany of potential funding mechanisms for the new stadium and convention center expansion.

The surprise: Seven of his 11 proposals included new taxes or a tax increase. While Espich made it clear the city could pick and choose combinations to hit the revenue figure needed for the expansion, Peterson and Democrats assailed the thought process behind it, reminding Hoosiers they weren’t the ones proposing the tax hikes.

The reaction-from Democrats, the general public and within the Republican caucus-to the Indianapolis project funding plan caused some top Republicans to think more carefully about the long-term implications of where they were headed, in terms of both policy and politics.

There is little stomach among lawmakers of both parties for going home to third-house, cracker barrel and chamber of commerce events during the session and getting assailed by constituents for raising taxes before-in the minds of the public, at least-all other options have been considered.

There is also concern about the electoral effect of tax-hike votes in the 2006 election cycle. While almost any budgetrelated vote can be twisted or interpreted to suggest a lawmaker has voted to “increase taxes,” few votes in recent years have tended to be as clear as some were shaping up to be this session.

Lots of Republicans-especially those recently elected on “no tax” pledges-made it clear to leadership where they stood. Last week, Espich took one big step back, removing the food and beverage tax measure from the agenda over concern that lawmakers were too quick on the tax trigger this session.

Lots of lawmakers in both chambers are becoming uneasy about all the tax talk. Look for their influence to be felt in this week’s House Republican budget proposal released-and again before April 29.