SENATE PANEL PASSES PROPERTY TAX REFORM BILL
Amended Plan Offers $600 Million in New Relief; Puts Cuts, Caps, Spending Controls in Place
A senate panel recently passed an amended version of Gov. Mitch Daniels’ property tax reform package. By a bi-partisan vote of 9-0, the Senate Committee on Tax and Fiscal Policy sends to the floor a bill that offers $600 million in new relief and puts cuts, caps and government spending controls in place.
Senate President Pro Tem David C. Long (R-Ft. Wayne) praised the bold work of the committee, which closely mirrored recommendations of an in-depth four-month study by Indiana’s Commission on State Tax and Financing Policy, which was comprised of Democratic and Republican legislators from both the Senate and House of Representatives, as well as citizen advisors. Long noted 2008 marks the fourth consecutive session senators have pushed property tax reform.
“This session, we are charged with the historic task of modernizing our state tax system. We can either advance change or accept the status quo. Today, my Senate colleagues have made a powerful and emphatic endorsement for change by passing House Bill 1001. I share their belief that we owe it to taxpayers to fix our broken system, to reduce our reliance on an antiquated tax, to enable local governments to help their own property taxpayers, and to give the voters opportunities to decide on costly government construction projects through referendums. This legislation puts taxpayers first, as it should be,” Long said.
The Senate version of HB 1001 includes:
Immediate Relief: The Senate’s version of HB 1001 provides an additional $600 million in relief for property taxes due in 2008 above and beyond what has already been appropriated by the state. Indiana’s current budget already includes a record $2.1 billion in property tax replacement and another $550 million is appropriated over two years to help offset property tax increases.
Supplemental Homeowner Deductions: Provides for a homeowner deduction of lesser of $45,000 or one-half of assessed value. Provides supplemental deduction equal to 35 percent of next $600,000 of AV and 25 percent on remaining AV over $600,000.
Permanent Property Tax Caps: Phases in by 2010 a 1 percent property tax cap on owner-occupied homes; a 2 percent cap on other residential properties and agricultural land; and 3 percent on businesses. A companion bill, Senate Joint Resolution 1, would make the 1 percent cap on homes permanent by adding it to the Indiana Constitution. Historically, previous property tax reductions through shifts to other taxes have proven to be temporary.
Property Tax Cuts: Implementation of caps (also known as circuit breakers) results in $342 million in property tax cuts in 2009 and $619 million in 2010.
Decreased Reliance on Property Taxes: Overall, the state pays $1 billion of local costs from state revenues other than property taxes resulting in $1 billion in additional property tax relief (remaining school general fund; child welfare, juvenile incarceration, K-12 pension debt, pre-school special education, and remaining 50 percent of pre-1977 local police and fire pensions).
Citizen Controls on Government Spending: Requires voter approval by public referendum for all government construction projects over $7 million or 0.5 percent of the local assessed valuation of area properties. Closes 18 loopholes and exceptions local units and schools may currently use to increase property taxes. County councils must review all budget and levy increases for taxing units within each county. Schools will adhere to stricter guidelines for planning and construction. Reforms and restricts the authority counties and cities have to remove areas from the tax base for economic development uses.
Uniform Assessment System: Combines duties of township assessors at the county level except for townships with 15,000 parcels or more in an effort to make property assessments more uniform and fair. Requires the county assessor to interview township assessors for employment. Allows satellite offices for convenience to taxpayers.
Sen. Luke Kenley (R-Noblesville), who chairs the committee, said he is “hopeful a recent slip in state tax receipts will not stand in the way of aggressive tax reform efforts by lawmakers. Fellow Hoosiers know we are committed to property tax relief and reform. What some consider a fragile economy is a hurdle not a barrier. We cannot be dissuaded from putting the taxpayers first and making the changes fair, far-reaching and final.”
Sen. Robert Meeks (R-LaGrange), who chairs the Senate Committee on Appropriations and serves on Kenley’s committee, emphasized the senate version of HB 1001 is “a responsible plan. There are ongoing revenue sources to fund the property tax relief and new state responsibilities and services. What’s more, for those of us who look out for our public school students, the plan builds a $400 million tuition reserve fund for rainy economic times.”
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