Home during Washington’s “fiscal cliff” negotiations, Indiana’s third U.S. senator, Phinneas Pfogghorn, met with me for a late afternoon coffee.
“Aren’t you needed in D.C.?” I asked.
“Only a brief sojourn,” he announced in a voice that could be heard throughout the room. “A stay dedicated to sanity among the good people of Indiana refreshes the mind and cleanses the soul.
“Besides,” the pride of Princeton and Portland pronounced, “I’m here to confer with the incoming governor.”
“You know him well?” I inquired.
“Well?” the joy of Jeffersonville asked. “Son, a politician can be known only by his deeds. That’s why I’m here to help the governor-to-be (g-t-b) to be on the right track from day one.”
Then, as if confiding in me, but without lowering his volume, the nuncio of New Castle and confessor of Crothersville said, “G-t-b Pence seeks to lower the state income tax rate from 3.4 percent to 3.1 percent.
“Hoosiers, however, tell us, through a Ball State Bowen Center poll that they would rather have the money spent on needed services woefully neglected by the state. Folks know we have been shortchanging education as well as the care of special needs children and adults.”
“But,” I interjected, “what if the g-t-b is determined to lower income taxes?”
“Then let him do it openly and fairly, treating every person alike without discrimination by age,” the monarch of Munster and Madison intoned.
“Age discrimination in taxation?” I said.
“Old as the bounteous hills of southern Indiana, ancient as the lakes of our northern counties,” Phinneas declared. “Currently if a member of the household is younger than age 18, he or she is worth $1,500 off adjusted gross income on the tax return. Age 18 to 64, a person brings a $1,000 benefit, and 65-plus is worth $2,000.
“Know what a $1,000 reduction in adjusted gross income is worth? At the current 3.4 percent rate, that $1,000 is equal to a measly $34.
“Why not,” he continued, “treat everyone the same regardless of age. As the philosopher, Dr. Seuss, suggested, ‘A person is a person, no matter how old.’
“Under the Pence plan that $34 shrinks to $31 because the tax rate falls. And the benefit of lower Pence tax rates are proportionately greater the higher the income of the household. Under my plan, the benefits are the same for all households of a given size.”
Now rolling, the sage of South Bend and totem of Terre Haute proceeded. “I’ll recommend to the g-t-b we raise the personal exemption from the current discriminatory mix to a single $3,000 per person. That will cut taxes for a family of four by $238 per year, regardless of income level.
“We already have a flat tax rate; why not a flat exemption amount? We should try to eliminate special treatment and discrimination in our tax laws.”
“Good luck,” I said.
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business.