A recent poll claims 62 percent of all Hoosiers support placing property tax caps into the Indiana Constitution. If the data from the poll can be trusted, it would indicate most Hoosiers think changing the Indiana Constitution will guarantee that their property taxes won't increase. Will a constitutional amendment really keep property taxes from increasing? Is a constitutional amendment really necessary? Or, is the proposed amendment simply a maneuver to bolster the political resume of a governor with presidential ambition and a mechanism to further the political ideology of a knee-jerk legislature? After all, the tax caps are already in place. They took effect this year with property taxes capped at 1 percent of the assessed value of owner-occupied homes, 2 percent for other residential and agricultural properties and 3 percent for businesses.
So far, the property tax caps have meant less revenue for local governments and school districts. Many fear that approval of the constitutional referendum will severely restrict future local budgets and result in increases of other forms of taxation. Indiana voters will have an opportunity to approve or reject the constitutional amendment when they go to the polls on Nov. 2.
How will Indiana's tax caps affect other units of county and city government?
What options are available to minimize the impact of the tax caps?
Will your taxes REALLY go down?
For answers to these, and other questions, you are invited to a non-partisan public forum to discuss the consequences of Indiana's property tax caps. Members of the general public, local elected officials and school administrators are encouraged to attend. This is a free public event.
What: Property Tax Caps Public Forum
Guest Speaker: David Bottorff, Executive Director, Association of Indiana Counties
When: Tuesday, October 26th at 5:30 p.m.
Where: Shelbyville Middle School cafetorium, 1200 West McKay Road, Shelbyville
If you haven't been following the Indiana Tax Cap debate, two recent articles on the issue follow. One written by an Indiana economist, the other by a Shelby County resident:
Indiana Economist: Vote "No" on Property Tax CapsBy Morton J. Marcus
On Nov. 2, Hoosiers will vote on making property tax caps a part of our state constitution. The governor and most state-level politicians support the caps. I will vote no.
First, the state legislature understood that property tax caps would reduce local government revenues. Some think this will force localities to become more efficient. Instead we are more likely to face deteriorating public services.
To meet the potential catastrophe, localities have been given toxic remedies. The local option income tax has been forced upon our communities by the General Assembly. This tax is levied on households only. The state did not give localities the power to tax local corporations. Therefore, a reduction in property taxes is enjoyed by all property owners, but paid for exclusively by households.
In addition, there are now referendum opportunities for local initiatives. These are expensive options that deny the benefits of representative government in favor of emotional campaigns in opposition to progress.
Second, I believe in the potential of local representative government. A constitutional amendment for property caps puts concrete shoes on a struggling institution already in deep water.
Local governments struggle to support police, fire, parks, and sanitation services. Winter weather can devastate local budgets. Local schools are the essential tools for economic development; they attract responsible citizens and send forth well-prepared students. Local libraries serve persons of all ages with information, connections to the online world and inexpensive entertainment.
As far back as the property tax reforms of 1973, Indiana degraded local government and shifted power to state government. The legislature has increased its control of our schools. Cities and towns have become prisoners of the state in the tax wars. Libraries have been forced to defend their very existence.
Yes, some local governments have built attractive city halls and some schools corporations have modernized their facilities while beset by local opposition. In retrospect, those objections often prove to be ill-informed attempts to prevent our communities from moving into modern times.
Third, homeowners think they are going to realize benefits from the caps, but that is not likely for the vast majority. A study by the Legislative Services Agency showed that only 4 percent of the tax reductions from the existing caps went to home-owners. Farmers got virtually nothing from the caps. Nearly 60 percent of the caps benefitted the owners of small rental housing units, commercial apartments, and second homes, with about 36 percent going to commercial and industrial properties.
If you believe in making local decisions locally, then vote against the tax caps.
If you believe that all property ought to be treated alike and taxes should not be shifted to households from businesses, vote no on caps.
If you believe that local government services are the foundation of your community's well-being, defeat the property tax caps proposition on the ballot.
(From a periodical column originally published week of Oct. 18 - 22, 2010. Marcus is an economist formerly with the Kelley School of Business at Indiana University.)
Shelby County Farmer: Tax Caps Not What They SeemBy Paula Nigh
Do you understand what the term "Property tax caps" really means? Most people I have asked either totally misunderstand it or they readily admit they do not really know.
The reason we are having a referendum on property tax caps this November, although it is currently law, is because the constitution of the state of Indiana must be changed if we are not going to have "a uniform and equal rate of property assessment and taxation," as the constitution now requires.
Charging some taxpayers 1 percent, others 2 percent and still others 3 percent is not uniform and equal taxation. In other words, the property tax cap law is presently unconstitutional, so we have to have a referendum to make it fit nicely and be constitutional. Because a referendum has been in the works since the property tax caps law was put into effect, court cases challenging the constitutionality of the current property tax caps law have not yet materialized.
The tax cap for homes is to be set at 1 percent of the gross assessed value of the property. A study done a few years ago estimated that a house must be assessed at about $275,000 to actually pay for the services that its residents have come to expect, and that amount did not include a 1 percent cap on the property tax. Services include fire and police protection, ambulance, hospital, library services, etc. and providing a public school education for only two children. How many Hoosier houses are valued at that price?
Farms and rental properties are to be assessed at 2 percent of the gross assessed value. The household on the farm expects the aforementioned services; however, with the exception of fire protection in years like this one, farm fields do not receive the other services, yet farmers are supposed to pay on their farmland a percent more than homeowners, a cost they cannot pass on to consumers, like a business or a landlord with rental property can.
Businesses are to pay 3 percent of the gross assessed value of their property. Small businesses are already struggling with providing continually increasing employee benefits and other costs of doing business that are rising. In addition to all these increasing expenses, businesses are constantly bombarded with requests to help various organizations with their fundraisers.
For the business owner, the taxes will obviously take a higher priority than sponsorships to aid other organizations. When school districts ask for additional funds in a referendum, that further eliminates any extra funds for helping with fundraisers and sponsorships in the schools and elsewhere. If a business is going to survive, the taxes will have to be paid before any handouts are given to those asking for one.
We have already heard how some schools, police and fire departments and libraries have had to make cuts because of the property tax caps. Another thing to consider on these property tax caps, besides public entities needing additional funds to continue the quality and quantity of the services people expect these days and the caps' unfair method of taxation, is the belief of many people that the 1 percent tax cap means their property tax bill will not increase more than one percent from one year to the next.
In other words, in many people's thinking, owners of a $100,000 house would be required to pay a tax of no more than $1000 (1 percent of $100,000). Most homeowners to whom I have talked, think that means that the next year their property tax would increase by no more than 1 percent above $1,000, or a total bill of $1,010, an increase of $10 from the previous year.
Nothing could be further from the truth.
As explained to me by my representative in the Indiana House and in reading the phrasing of the referendum on the ballot, I understand that the tax bill for an owner-occupied house is 1 percent of the gross assessed value of the house. So in the instance of the house valued at $100,000, that house's tax bill would be no more than $1,000.
However, if during the next assessment year the assessment increases to a value of $110,000, a 10 percent increase in the gross assessed value of the house, then the property tax could also increase by 10 percent, a $100 increase, not a $10 increase as thought by most people who think they understand the property tax cap. Again, the 1 percent tax cap for homeowners means that their property tax BILL can increase, or decrease, in accordance with the gross assessed value of their property. If the property increases greatly, so may their tax bill.
We are currently in a recession with a lot of foreclosures and falling property values. I have heard homeowners praise the 1 percent cap presently in place by law because they have seen their property tax bill increase by only 1 percent or even less than the previous year. They are convinced the property tax cap idea is great. What they don't realize is that in this time of falling property values, their tax bill should have decreased because their home's value decreased.
When we rebound from this recession, we will see gross assessed values rise, possibly skyrocket, if inflation also kicks in at the same time. Taxpayers will then see their property tax bills increase, perhaps dramatically, and feel betrayed by what they have been told by those pushing for the passage of property tax caps.
Property taxes are not supposed to increase exponentially from year to year.
Probably most property owners typically expect a modest increase in their property taxes each year. To maintain a modest increase, not sticker shock, when gross assessed value of property increases, ideally, the tax rate is supposed to decrease accordingly so the taxpayer is not hit with a huge increase in his/her property tax bill. Likewise, when the property's gross assessed value stays the same, or decreases, we can expect an increase in the tax rate.
The public's outcry against property taxes seemed to come when Indiana went to the fair market value system of assessments. Too many boards who set tax rates failed to realize they needed to lower their tax rates because the assessments had so greatly increased under the new system.
The public truly needs to ask questions, study this proposal, and be educated about property tax caps and their repercussions before this upcoming November election.
(From a newspaper submission originally published Tuesday, October 19, 2010. Nigh's family farms in Shelby County.)
Posted: Monday, November 1, 2010
Article comment by:
Tax caps are already in place under state law. By putting them in the state's constitution, we are effectively hamstringing local governments for generations. When school systems start to decline due to lack of funds and our property values continue to drop as a result, we'll all be wishing this didn't pass. It's extremely short sighted and it will have long-lasting ramifications. I will be voting NO to tax caps.
Your two articles gave a good spin on the tax caps but the simple fact is that in Indiana 64% of the public supports the tax caps. We need these caps put in place with the upcoming economic situation in this country growing bleaker. Those that own their home should not be bled dry just so that the democratic legislators can frivolously spend the money. The current tax caps in place have forced cities and towns to streamline their budgets which they have needed to do for years. Its ugly but these cuts are needed just as other cuts are needed in our federal budget.
I will be voting for Property Tax Caps!
Posted: Friday, October 22, 2010
Article comment by:
Excellent presentation, Dee Bonner.
I will be voting against the tax cap and I hope a lot of people join me.