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GOVERNOR DANIELS
RELEASES PROPERTY TAX PLAN
On October 23, 2007, Governor Mitch Daniels unveiled his
long-awaited proposal for overhauling Indiana's property tax system. Some
have called for the outright elimination of property taxes. While
the Governor's office indicated this had been considered, they quickly
concluded that total elimination of property taxes was not a fiscally
viable alternative.
Early reaction to the Governor's proposal has
been mixed, though it is widely regarded in most circles as at least
a first step to solving Indiana's property tax issues. Highlights
of the proposal include the following:
- Permanent Caps. Through constitutional amendment, the plan
would establish permanent tax liability caps of 1% of assessed value for homeowners,
2% of assessed value for residential rental property owners, and 3%
of assessed value for business property taxes. Agricultural land would
continue to be assessed as it presently is assessed. Currently,
Indiana's Constitution requires a "uniform and equal rate of assessment
and taxation for all property, both real and personal."
- In 2008, an expanded homestead credit will take effect for residential
property owners and will be funded from a combination of sources,
including horse track license fees and a one-cent increase in the
state sales tax.
- Additional relief would come in 2009 through an expansion of the
residential homestead deduction, state assumption of certain local
government costs, and the first application of the proposed 1% cap
on homeowner property taxes.
- Limits on Local Spending Increases. The Governor's plan
would empower a Tax and Capital Control Board in each county to serve
as a single point of accountability for approval of annual budgets
for all taxing units within that county. This is intended to
solve the problem of seemingly uncontrolled increases in local tax
rates due to the lack of coordination between individual taxing districts
and their spending decisions. Additionally, total local
spending increases would be limited to the county's average personal income
growth rate over a six year period, unless higher increases are approved
by taxpayers through referendum. Finally, all "significant local construction
projects" (which is, as yet, undefined) would have to be approved through
local referendum.
- Elimination of Elected
Assessors. The Governor's plan would eliminate the township and county
assessors in Indiana. Instead, each county would have a single professional
assessor appointed by the County Council. This change is intended to
improve uniformity and quality of assessments throughout counties and throughout
the state.
- Meeting Fiscal Obligations. Any
remaining local spending obligation not covered after application of all
caps on tax liabilities for taxpayers and limitations of rate increase would
either have to be offset by cuts in local spending, or by adoption of a county
option income tax.
Some (General) Assembly Required
There are some components of the governor's plan that can be enacted
without action being taken by the Legislature. For example, a percentage
of the revenue generated from the new slot machines at Indiana's horse tracks
will be used to provide the tax rebate check promised to all Hoosier taxpayers
in the Budget Bill passed during the final hours of the '07 session. The balance
of the slot machines revenue will be discretionary spending for the Governor
to use for parts of his plan. Also, revenue created by the new licensing
fees from the two horse tracks that will be paid in November 2007 and November
2008 is money the Governor may use at his discretion for parts of the plan.
Some components of the Governor's proposed property tax plan will require
action by the General Assembly in '08 before they may be enacted. For example,
the proposed 1% increase in the state sales tax will require new legislation
as will the proposed increase in the Homestead Deduction Credit. The
General Assembly will need to pass legislation to eliminate local assessors
as well as to establish one central assessing authority in each county in
the state.
Finally, and the most time consuming, is the process that has to be followed
to amend Indiana's Constitution before the proposed caps on property taxes
can go into effect. To amend Indiana's Constitution, legislation creating
the caps will have to pass two consecutive sessions of the General Assembly
(presumably in 2008 and in 2009) and then receive the support of voters in
the next general election year (which would be 2010). The property tax caps
would go into effect beginning in 2011.
Legislative Conference ~ November 28, 2007
The 16th Annual Bingham McHale Legislative Conference in association
with INGroup is set for Wednesday, November 28, at the Indiana Convention
Center, including a discussion of the Governor’s proposed plan, lead by State Rep.
Bill Crawford, Chair of the House Ways & Means Committee; State Rep. Jeff
Espich, Ranking Member of the House Ways & Means Committee; State Sen. Luke
Kenley, Chair of the Senate Tax & Fiscal Policy Committee; and South
Bend Mayor Stephen Luecke.
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