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Property tax cap up to voters

January 27, 2010
The property tax issue has long been a thorn in the side of Indiana residents and has been one of the main topics discussed in the General Assembly for years.

This year, voters will have a say in the issue after the Republican-controlled State Senate passed legislation last week with a 35-15 vote that could put property tax caps into the Indiana Constitution. Just days earlier, the Democrat-controlled House voted 75-23 to approve the limits. Two years ago, lawmakers placed limits on property tax increases, and voters will decide in November if those limits will become permanent.

During his televised State of the State address last Tuesday evening, Gov. Mitch Daniels said, "At 2:31 p.m. this afternoon, the people's branch of government lived up to its name. You gave the people the chance to decide, and I believe they will, that lower property taxes are here to stay."

The caps, which limit the property taxes of homeowners to 1 percent of assessed value, rental and farm property at 2 percent and business property at 3 percent, are supposed to save Indiana property owners $404 million in 2010 and $488 million in 2011.

But even if homeowners see savings on their property taxes, local governments could see a substantial loss of revenue greater than what they have already experienced in the last two years.

"Lawmakers should wait and see if the tax caps work or whether they need to be tweaked," Sen. Vi Simpson, D-Ellettsville, said in a press release. "I would prefer to let voters amend the Constitution a few years in the future when we know what we're doing. Right now, it's just a shot in the dark, or maybe just good politics."

Sen. Richard Young, D-Milltown, agrees with Simpson.

"I didn't support it," he said. "I feel it's unconstitutional. The big counties like Lake and St. Joe are exempt. With the economy so stressed right now, I feel we should wait and see how it works. This could have a huge impact on schools and local governments in providing services.

"Only about 23 percent of homeowners will get any relief, and that will mostly be in larger counties. I have long worked for property tax relief, but this is not the right way to achieve it. If your assessed value goes up, so will your taxes."

Some lawmakers have indicated that those most affected by the cuts in property taxes, including education, local governments and public safety, chose not to make their case to lawmakers.

Matt Greller, executive director of the Indiana Association of Cities and Towns, disagreed, saying in a press release that his group and local communities all over the state repeatedly have voiced their opposition to the tax caps and predicted widespread local government layoffs, including police and fire, and that the quality of services in local communities will decline.

"We have held hundreds of meetings with legislators, testified in dozens of committee hearings, held press conferences, sought out countless editorial board meetings with newspapers statewide, formed alliances with like-minded organizations and developed data models to show the potential negative impacts of permanent caps," Greller said.

"We have shared our concerns with lawmakers on multiple occasions for more than three years.

"The placement of tax caps into the Indiana Constitution could seriously impact the future of Indiana's cities and towns and their long-term ability to grow jobs in safe, clean and affordable communities.

"This action will forever tie the hands of future General Assemblies to react to any unforeseen economic reality and puts a level of specificity into our Constitution that is completely unprecedented," Greller continued.

"It is also important to remember that this measure is mostly only protecting a small percentage of homeowners."

"Our Constitution treats everyone equally," Young said. "I don't think the tax caps do that."

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