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September 22, 2013

HOWEY: How about a home tax abatement?

INDIANAPOLIS — We need jobs.

In the five years since the mortgage bubble burst, Wall Street went into meltdown and the taxpayers from Main Street bailed the 1 percenters out, I survey friends and family who, in 2007 were quite doing well.

And today, most of them struggle.

We live in a state with a persistent jobless rate of 8.4 percent, and well more than 250,000 Hoosiers are officially unemployed. Hundreds of thousands more are underemployed, working two or three jobs. The U.S. Census Bureau reported this week that while the median U.S. household income is at $51,017, Indiana is at 9 percent below, at $46,707.

Utterly unacceptable.

“Generally, we’re looking at sort of a lost decade for Hoosier families,” said Derek Thomas, a senior policy analyst for the Indiana Community Action Association. He told the Associated Press that unless effective policy changes are made, the next decade is likely to follow the trend.

I had lunch with a boyhood friend of mine from Michigan City, Rob Jagger, who owns Old Fort Building Supply in South Bend. When I asked the inevitable “how’s business” question, I got that pained look, the kind of expression one has when they batten down the hatches. I see that look from businessmen all across the state.

The problem is, this storm that began in September 2008 is still raging, even though the Great Recession officially ended some two or three years ago.

Washington, D.C., is in a state of gridlock. There are no solutions to be found with that dysfunctional mob of pretenders.

What could we do?

Jagger observed that in scores of Indiana communities, tax abatements are given to businesses willing to relocate or expand.

“What about a tax abatement for someone who wants to build a new house?” he asked.

It would work like this: you want to build a new house, or add on an in-law quarter for Mom, who just ain’t what she used to be. So the state could come up with a program that grants you a five-year property tax abatement, just like the big corporations and businesses get.

You build your house and pay no property taxes the first year, then 20 percent the second, 40 percent the third ...

You get it.

Here in Indiana, in the last few years, we’ve phased out the inheritance tax, which does virtually nothing for the middle class. We have cut the financial institutions and corporate taxes, which doesn’t do squat for the middle class.

And then there was Gov. Mike Pence’s 5 percent income tax cut, which you might notice if you squint and compare your last pay stub to one from last June.

That was symbolic. It will do little to create jobs.

In a Howey Politics Indiana column by former House Majority Leader Russ Stilwell in May, he told this story: A couple years ago I asked a corporate finance officer of a large Indiana company what would happen if they received a 25 percent Hoosier corporate tax cut. Would they create jobs with the new found money? The answer was sobering.

“We don’t create jobs with tax cuts. We create jobs when there is more demand for our product. We cut jobs when the demand is less demand. I hate to say this, but any new found money at the end of the year is added to our profit line. That extra profit would just mean my share of the profits [bonus] would just be larger.”

Indiana jobs will be created when people start buying stuff. When places like Old Fort begin to have more customers.

So Gov. Pence and the Indiana General Assembly in 2014 should create the Middle Class Home Improvement Tax Abatement Program. It should create tax incentives for Hoosiers to build more homes, and add on to the ones they’ve got.

When we start building more homes and adding on to existing ones, more contractors will be employed to construct them. More masons will lay brick. More drywall will be nailed in. More toilets, granite kitchen counter tops, garage doors and fireplace inserts will be bought, and more nails and screws will be sold everywhere from Lowe’s to the local hardware store.

When we sell more stuff, more people will have work. More businesses will make money. And the more people work and the more stuff that is sold, the more income and sales taxes they will pay.

Everything Gov. Pence and the Indiana General Assembly does in 2014 should be aimed at creating incentives for more jobs, and educating our workforce to fill them.

The governor laid some excellent groundwork with his Work Councils legislation that will match the needs of local businesses and industries to the curriculum in our local vocational schools.

But to really gin up the production and the sales, we have to do more for the middle class than giving them a $50 or $100 a year income tax cut.

As Thomas of the Community Action Association observed, “We need quality jobs that meet the needs of family.”

Give the Hoosier middle class a home improvement tax abatement.

Give us jobs, damn it.

— Brian Howey publishes at www.howeypolitics.com. Find him on Twitter @hwypol

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