The holidays are here. Time for good cheer and happy thoughts, even if candy canes and sugar plums cost 7.8 percent more this year than last. That’s the 12-month inflation rate as of October 2022. The Consumer Price Index for all items shows prices 7.8 percent higher than in October 2021. This year has seen the highest inflation since the early 1980s. How did that happen?
COLA stands for cost of living adjustment, and both the Social Security Administration and the Internal Revenue Service have just announced big COLAs for next year. COLAs are nothing new. They’ve been happening for decades. But inflation has been so low for so long that we hardly noticed them. Now inflation is the highest it’s been in 40 years, and COLAs are in the news.
The Federal Reserve is serious about battling inflation. They’ve raised their policy interest rate from near zero in February to an average of 2.33 percent in August. Earlier this week they raised it three-quarters of a point. It hasn’t been above 3 percent since early 2008. The idea is to get people to borrow less, so they’ll spend less, so businesses have less reason to raise prices. Not much has happened to inflation yet – except in the housing market. That’s no surprise. Most houses are boug...
Is this a recession? Real gross domestic product has dropped for two straight quarters. Real GDP is our measure of goods and services produced, adjusted for inflation, and the United States is producing less now than it was at the end of 2021. Usually that’s exactly what we mean by a recession.
Mid-July is number-cruncher nirvana if you follow the Indiana state budget. That’s when the State Budget Agency releases its closeout for the previous fiscal year. This year the glorious day fell on Friday, July 15, and we learned one astounding fact: At the end of June, the end of fiscal year 2022, Indiana balances were $6.1 billion. Our state has six billion dollars in the bank.
The inflation rate in May was 8.6 percent, the highest since the bad old days of the Great Inflation 40 years ago. We’re all paying higher prices. So are our school districts. School districts face some costs that increase as prices rise, and other costs that don’t. Food, fuel and equipment prices rise, and schools must pay. But teacher salaries are set in contracts, and until those contracts expire, inflation won’t have an effect. In 2021, Indiana public schools paid 62,000 teachers $4.4 billio...
Have you received your Form 11 from your Indiana county assessor? Purdue Economist Larry Deboer has. He was both shocked and not shocked by his new assessment. In this month's episode, Larry walks us through potential impacts of property assessments.
Election Day is coming up – on Tuesday, May 3 – and school referendums will be on the ballot in nine school districts. It’s best if voters investigate the referendum issues in advance, so they know whether to vote yes or no. What if you didn’t do your homework and want to do the benefit-cost comparison on the fly, in the voting booth? Larry Deboer has advice just for you.
Here’s one way to think about property taxes: The local government sets its budget, subtracts all other tax revenue, and raises the remainder with the property tax levy. The assessor measures the value of all the parcels of taxable property inside the boundaries of the government. Then the government measures the share of each parcel in total assessed value. That is the share of the levy that the owners must pay. In other words, your property’s share in the total value of property is your share ...
The inflation rate was 7.5 percent from January 2021 to January 2022, the highest inflation in 40 years. It arrived suddenly and unexpectedly. A year ago the inflation rate was 1.4 percent, which was lower than the 1.7 percent average rate over the previous decade. It’s an unwelcome throwback to the Great Inflation of the 1970s. What happened, and when will it go away?
Farmland property taxes have been falling. Total property taxes paid by agricultural property owners fell 2.3 percent per year from 2017 to 2021, mostly because of lower farmland assessed values. But farmland prices are rising. A Purdue Agricultural Economics survey showed that average farmland selling prices increased 12.5% from 2020 to 2021. Eventually, farmland assessed values will rise too.
The property tax is the biggest source of tax revenue for most Indiana local governments, and they were worried about the effect of the COVID recession on property tax revenues. But rising home values in 2020 will increase assessed values for tax bills in 2022.
What will be the effect of the COVID recession on the property taxes that fund Indiana local governments? I’ve been thinking and writing about the possibilities for a year and a half. Now we have enough data to answer that question. No spoilers, though. Let’s consider what could happen—and what did happen after the Great Recession in 2007-09. The Great Recession depressed new construction and reduced the demand for property. Property prices fell, especially for homes. Statewide, assessed values ...
Americans are having fewer children. Reports this past summer showed that the fertility rate dropped in 2020, to 56 births per 1,000 women age 15 to 44. Only 5.6 percent of women in their child-bearing years had babies. Early indications for 2021 showed a further decline. Fertility has been dropping for more than a decade. Fertility rates peaked in 2007 at 69 per 1,000 women age 15 to 44. The rate had been rising in the decade before that. Let’s take a longer view. Much longer....
Where is our economy going? Let’s ask some folks whose job it is to forecast the future of the U.S. economy. How about looking at three forecasts – one from government economists, one from academic economists, and one from business economists.
The recession may be over for the U.S. economy, but for Indiana local governments the recession is just about to start. That’s because the property tax and the local income tax respond to economic changes with a two-year delay. What happened to the economy in 2020 happens to local tax revenues in 2022.
Indiana's fiscal new year began on July 1, and there are reasons to celebrate. Listen to Dr. Larry Deboer explain why.
We’ve got an inflation problem. What should we do about it? That depends on what kind of inflation problem we’ve got. In May the consumer price index was 4.9% higher than it was 12 months before. The last time we saw an inflation rate that high was July 2008. The last time it was that high, and it was more than just rising gasoline prices, was October 1990. It’s the highest inflation rate in almost 31 years. Inflation has increased these past three months, March through May. Partly that’s becaus...
Might things be looking up? Dr. Larry Deboer takes a closer look at Indiana state revenue forecasts.
What will happen with all the pent up demand for goods and services once the pandemic has passed? Dr. Larry Deboer has some thoughts...and a history lesson.
Tax season is coming up. Federal income taxes are due on April 15, back to the normal date after last year’s delay. That’s the due date for Indiana’s state and local income taxes, too. The first installment of the property tax is due on May 10. You pay your motor vehicle excise tax with your vehicle registration each year. The due dates are based alphabetically; my last name gives me an April 7 due date. And, of course, sales taxes and motor fuel taxes know no season. You pay those when you shop...
If you want to be remembered in economics, get yourself a curve. There’s the Lorenz curve, the Laffer curve, the Kuznets curve, and, probably most famous, the Phillips curve. Phillips was A.W. Phillips, an economist from New Zealand who worked in London. In 1958 he drew a curve connecting the dots between inflation and unemployment. When unemployment went down, inflation went up. The Phillips Curve took the economics profession by storm.
The December state revenue forecast for Indiana projected that individual income tax revenue would be about $6 billion this year. But Indiana uses local income taxes too, and we know that the income tax revenues that local governments receive in 2021 will be just over $3 billion.
Can it be, is it possible, that 2021 won’t be terrible? The state revenue forecast was released on December 16 to provide a starting point for the Indiana General Assembly to craft a new state budget. Might the coming biennium be OK? It didn’t look OK last June. State revenues suffered an extraordinary drop in the last quarter of fiscal 2020, down $1.4 billion, 27 percent less than expected. We covered the loss by restricting agency spending and drawing down balances. What had been $2.3 billion ...
How does the Great Recession of 2007-2008 compare to the COVID Recession of 2020? Larry Deboer, ag economist at Purdue University, explains.
Though some predictions are harder than others, we are confident about this one: Property tax bills for farmland owners will go down next year. We can predict this because we know the base rate for farmland for tax bills in 2021. The base rate is the starting point for the assessment of farmland. The state’s Department of Local Government Finance applied its formula to six years of data on corn and soybean prices, land rents, interest rates and costs, and came up with $1,280 per acre. That’s 18 ...
Forecasts? Don’t talk about forecasts. You kidding me? I just want to know what’s happening now! With apologies to Jim Mora, that’s our problem. What’s happening in our economy, right now?
Believe it or not, these three things get tied together as Purdue Extension specialist, Larry Deboer, explains. Spoiler alert, the pandemic is part of the story.
We got trouble, my friends, "with a capital T." The Indiana state budget closeout for fiscal 2020 was held in mid-July, so we have a good idea of how bad things are. Now that we know the numbers, we can take a look ahead. Let’s do some “supposing” about what could happen during this fiscal year 2021, and during the next biennium.
Timely topics on public policy issues related to state and local government in Indiana.
