FOR IMMEDIATE RELEASE
Rebate checks vs. tax credits?
Kenley to host 2nd property tax hearing Monday
(STATEHOUSE) – Indiana’s Commission on State Tax and Financing Policy will focus on the issue of direct rebate checks versus credits on upcoming property tax bills when its study of the property tax crisis continues Monday. The commission’s second meeting is scheduled for 9 a.m. in Room 404 of the Statehouse, according to Sen. Luke Kenley (R-Noblesville), who chairs the bipartisan group.
This year’s Indiana General Assembly passed a plan to mail $300 million in rebate checks directly to property owners in hopes of easing the pain of anticipated increases in property taxes. Some have questioned the efficiency of that plan and suggested credits on future property tax bills would be more appropriate. Another $250 million in tax credits was appropriated for next year.
In addition to testimony and discussion on the form the direct relief should take, the commission will also focus on the assessment system and why there have been so many complaints of disparity in property values. Critics of the current system say there are too many assessors at too many levels of government.
During the first hearing, State Rep. Jeff Espich (R-Uniondale) pointed out Indiana has the third largest number of assessors in the nation – 1,100 in all.
Kenley’s Commission on State Tax and Financing Policy met for the first time Monday, July 23. It was an all-day hearing, attended by approximately 150 people. Dozens of Indiana residents spoke to the commission, sharing stories of taxation hardship and offering ideas on solving the problems.
Kenley said it may have seemed “grueling” at times to those in attendance, but the information shared was “very valuable for commission members to hear.”
Two experts on the subject of taxation tried to bring perspective and context to the current dilemma. Dr. Larry DeBoer, a Purdue University professor of economics, presented an overview of Indiana’s property tax history. William Sheldrake, president of Policy Analytics LLC, offered analysis of the effects of 2007 property tax legislation.
According to DeBoer, houses were under-assessed for decades compared to business property. In 1993 the Lake County town of St. John challenged the assessment system – a case eventually heard by the Indiana Supreme Court, which ruled in 1998 that assessment should be based on a market value system. So, in 2002-2003, reassessment raised tax bills for older homes, rental housing and farm land. Along with those changes came increases in sales, cigarette and gaming taxes to provide added property tax relief.
The court-ordered market value system would allow for property tax assessments to change gradually, based on actual, annual sales of like properties in a given area. However, because of the delay in developing and implementing the system, Hoosier taxpayers are facing a six-year sticker shock, according to DeBoer.
DeBoer estimated this “trending” coupled with possible errors in business assessments accounts for about 10 of the 24 percent average increase seen by Hoosier property taxpayers this year.
Six percent was attributed to increases in local government spending and tax collections. Indiana’s elimination of the inventory tax to promote automotive, warehousing and distribution jobs added around 4 percent to property tax bills, as did the state’s cap on tax relief, DeBoer said.
Sheldrake told the commission that Indiana relies more on property taxes than many other states and has a higher dependence on business to fund local government. He said his research shows Indiana has a relatively low income tax rate—both at the state and local level—and an average sales tax compared to other states. He cautioned against using an income tax to replace property taxes entirely.
“This is a difficult time, but an opportunistic time,” he said. “Some of the control mechanisms, if utilized, promise greater local citizen involvement,” Sheldrake said. “Local governments have more tools to affect their own tax mix.”
Sheldrake pointed out new options granted in state law to local government officials:
- A maximum 1 percent local option income tax (LOIT) to freeze local property tax levies;
- A maximum 1 percent LOIT to reduce property taxes on a dollar for dollar basis; and
- A maximum 0.25 percent LOIT for public safety, except in Marion County where the maximum is 0.50 percent.
Also significant, Sheldrake said, are new capital projects review boards at the county level beginning in 2009. Made up of taxpayers, local government and school officials, these boards will review government construction projects in hopes of containing costs and preventing too many expensive government or school projects at one time.
Also among those who testified were Sens. Teresa Lubbers and Pat Miller (Rs-Indianapolis). Both stressed the need for significant, permanent change in the property tax system.
“The property tax should be reasonable, knowable and fixed for every homeowner or it should be abolished,” Lubbers said. “Today, it is not any of those things.”
Lubbers said in addition to reviewing the assessment system, the state should provide relief to property taxpayers by picking up total operating costs of schools as well as costs associated with welfare and juvenile incarceration.
Because property taxes are based on the cost of local government divided among local taxpayers, Miller reiterated her longtime stand that the state eliminate its 0.1 percent share of property taxes, making it transparent to taxpayers where property tax dollars are spent. She also suggested commission members look closely at what other states are doing.
Sen. Brandt Hershman (R-Wheatfield), a member of the commission, said as many as 21 other states are currently examining property tax relief issues.
The commission is comprised of Republican and Democrat lawmakers from both the Indiana Senate and House of Representatives. The commission meets when the legislature is not in session.
Leaders of the Republican-led Senate and Democratic-controlled House of Representatives have identified the commission as the appropriate bipartisan mechanism to reform or reject Indiana’s current property tax system.
Public participation is welcome. Citizens are invited to attend the meeting or view a live broadcast via the Internet. The link for this particular hearing is at http://mediaserver.ihets.org/waysandmeans.
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