Summer 2002

A taxing situation

The governor used it, state legislators plugged into it, even the news media have run numbers through a tax prognosticating tool developed by Purdue agricultural economist Larry DeBoer.

During the last session of the General Assembly when Indiana lawmakers were debating issues of reassessment, tax restructuring and revenue shortfall, many turned to DeBoer's model to calculate potential tax impacts.

His model was developed over the past few years using data on Hoosier incomes, home values and expenditures based on sales and excise taxes. "Some people are more typical than others," notes DeBoer, "But the model tries to mimic the experiences of most taxpayers."

The scenarios he created not only juggle the amounts of current tax commitments, but also forecast the effects of taxing products or services not currently taxed. "Suppose the state decides to start taxing personal services, such as haircuts," DeBoer says. "The model can add sales tax to those items and that is calculated into the total tax bill for our imaginary families."