FROM THE DESK OF SENATOR DAVID LONG
Recently, I’ve written a great deal about the current debate concerning property taxes in Indiana that is occurring in the State Capitol. At the time of this writing, the Legislature is meeting in a mini-Session, the Indiana Senate has just passed a piece of legislation concerning property tax reform, and this bill has been sent on to the House of Representatives for further consideration. Likewise, the House has passed its own bill, and this has been sent along to the Senate (a bill must pass both the Senate and House before it can be sent to the Governor for his signature). On December 1st, each body will begin hearings on the other’s bill, with final votes in each Chamber set for December 5th. Then, the debate will head for Conference Committees, where each side will work together to try to blend the two bills for final approval.
To be honest, I’m skeptical that the Senate and House can reach agreement, because the two pieces of legislation are so completely different. The House’s version barely passed along strictly partisan lines, with 51 Democrats voting for the bill, and 49 Republicans against. The Senate version, in contrast, had strong bi-partisan support, passing 43-6. I’ll touch on these differences in a moment.
A quick backrounder as to why we are meeting now when the Session normally doesn’t start until January: Speaker Pat Bauer of the House announced his intent to pass a bill to “assist” those property taxpayers around the State who have seen their bills increase to abnormally high levels after the Reassessment has been completed in their County. This, even though 47 out of 92 counties in the State still haven’t completed their reassessments (including Allen), thereby creating the situation where no one truly knows what the impact of reassessment will be in those counties.
The question has been repeatedly asked “Why rush into this; why not wait until January or February when we’ll have a better idea about who has truly been hurt by reassessment, and then be able to pass more meaningful legislation?” Well, because Speaker Bauer has two political agendas he wants to achieve. First, because the margin of seats held in the House is so thin, every Democrat needs to win their seat next November or the House will change to Republican control. There is a Democratic representative in Marion County whose district has been perhaps the hardest hit in the State with property tax increases (in fact, this is the only area in the State that has had such increases), and many have speculated that this mini-Session is being held just to help this one Representative. However, there is another reason: the Speaker is angry because there are some city and county leaders around the State who are trying to blame the Legislature for any tax increases that have occurred in their area, when in fact it is the local entities themselves who have raised the taxes, and are merely trying to hide behind the Reassessment to cover their actions. The Speaker wants them to pay for that, and so the House bill contains some punitive language regarding local government budgets.
So lets quickly discuss the differences between the House and Senate bills, and see why it will be hard to find common ground.
The House plan, drafted by the House Democrats (who are in control), basically seeks to create tax breaks for those with older homes, from the 50 to over 100 year old category. There are other tax breaks as well, but the key shift in taxes would be away from the older homes. This would certainly help the owners of the homes in Marion county that were so hard hit with increases. And I am sympathetic to their plight, and want to do something to help them as well. Indeed, we may well face something like this on Forest Park Blvd as well as the Foster Park area in Fort Wayne. But we don’t know that yet, since our county’s assessment isn’t yet complete, and won’t be until at least February.
Worse, however, is the fact that the House Democrat plan shifts around $300 million dollars back onto other taxpayers. There is no way to pay for the tax relief for older homes, so it must go back onto other taxpayer’s shoulders. Owners of homes worth less than $70,000, small businesses and farmers, as well as other homeowners of properties around the 30-40 year range: each of these groups is likely to have to pay higher taxes to help the owners of these older homes.
I believe we should try to find help for the owners of the older homes that are hard hit with tax increases. However, that relief should come from the state’s own coffers, and should not be put on the backs of other property taxpayers, many of whom are getting tax relief under the reassessment because they have paid too much over the years, while the owners of older homes have paid too little.
The House plan also proposes to retroactively reopen local government budgets, and to reduce their property tax levies for this last budget cycle. The idea of further limiting the ability of local government to raise property taxes is a good one, but to do it retroactively is a terrible idea, and can only create chaos.
The Senate plan, drafted by the Senate Republicans (who are in control), does not propose any tax shifts. Instead, it tries to look forward, and suggests numerous changes in the law designed to limit local government tax increases in the future, including the elimination of a number of loopholes that have been abused lately by those local government bodies. Without getting too technical (these discussions can make anyone’s eyes glaze over), the Senate plan will make sure that local government property tax increases can go no higher than 5% per year (which was the plan when property tax reform was enacted in 1973). Some local governmental bodies have increased their taxes as high as 30-40% this past year. How could they do this, you ask? Well, current law allows a taxing unit to “bank” its property tax increases. An example: say the City of Ft. Wayne doesn’t raise property taxes in a certain year. That unused 5% can then be banked, and the next year, the City could raise your taxes the annual 5%, as well as another 5% for the previous year’s unused portion. Put enough banked property tax levies into the mix, and you could potentially have a massive tax increase in one year, as we have seen from some taxing units around the state. Under the Senate plan, no banking could be done in the future.
The Senate plan has other changes as well, including the elimination of buffers. Buffers are the amount of additional taxes a taxing unit can charge over and above the 5% limits in order to cushion the blow of appeals from taxpayers. While buffers have allowed a more efficient flow of dollars to the taxing unit, they have truly been abused in the past. For example, one taxing unit regularly hits its taxpayers with an additional 2% increase
(7% total) to buffer against appeals. But their appeal history is minimal, and that taxing unit has simply kept the 2% as a windfall. The taxpayers don’t get the money back, nor do they get a credit for next year’s taxes. That is simply wrong!
The Senate plan will force the taxing unit to credit the taxpayer’s bill the next year for whatever excesses occurred as a result of buffering. From now on, the taxpayer gets the money back!
Other changes include extending the filing deadline for homestead credits to December 15th of this year for 2004 homestead credits (if you haven’t signed up at the County Auditor’s office by March 1, normally you can’t get it for the next year. However, this year, you will get until December 15th to sign up. Any one who hasn’t taken advantage of a homestead credit for their primary residence should do so immediately!). The Senate also proposes to increase the new property tax deduction for taxpayers for the 2004 Indiana income tax return. Again, this is help in the near future. In the long run, this will truly save the taxpayers some real money.
And finally, the Senate plan requires that any county library system that wants to increase property taxes beyond the regular 5% maximum must have their proposal reviewed and approved by the County Council. This would eliminate a true taxpayer injustice, where your property taxes can be increased by an unelected board. Taxation without representation should never be allowed to occur.
Overall, taxpayer relief from the Senate is paid for, instead of shifting taxes from one group to another. Everyone should benefit from this plan, but it will be in the years starting 2004 and beyond, and not retroactively for 2003.
We shall see what happens. The House and Senate versions are far apart, but hopefully we can find common ground on the non-tax shifting provisions, and come back in January to work on issues such as help for the owners of older homes.
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