Change in Party, Same-old Story: Indiana Residents Face Tax Hikes.
British Prime Minister Margaret Thatcher was famous for attacking the "ratchet effect," by which government spending went one direction (up). It looks like the ratchet is working well in Indiana, an alleged bastion of limited government.

Mitch Daniels, the former budget director for President George W. Bush, is the new governor of Indiana. His new budget proposal calls for a 29 percent tax increase on some taxpayers. The increase is allegedly "temporary." (Temporary tax increase? I've got a bridge ....)

Since 1989, Indiana government spending has risen more than double the rate of inflation (124 percent). It is often argued that rising costs simply reflect the fact that government buys a different, and more expensive, set of goods and services than the general economy. Fair enough, government budgets are top-heavy with professional staffers, though that's often an excuse to avoid hard choices.

As various reformers such as Peter Hutchinson and Stephen Goldsmith (a Democrat and Republican, respectively) have shown, there's a lot of room for injecting a healthy dose of smarter spending and competition into government. (The Performance Institute is a good resource, while we're on the topic.) This is on top of a healthy political debate over whether the current scope of government ought to be pulled back.

A Wall Street Journal editorial offers options on both the revenue and spending side, noting that governors in Florida, Maryland and Texas have balanced budgets without tax increases.

Spending half of the rainy day fund (which is twice the size of the expected take from a tax increase) could be one part of the solution. Says the Journal, dryly: "that "rainy day" has arrived." A tax amnesty program could bring in at least $60 million, nearly one-quarter of the budget shortfall of $250 million.

But that's only a temporary solution; the structural deficit is likely to continue without some attention to the spending side.

There is, says the Journal, certainly value in paying attention to the spending side: "a state with a vehicle fleet so large that it has more than one automobile for every three state employees is ripe for other cutting." (permalink)