Having imbibed — some might say over-imbibed — in property tax issues for the past couple years, it has been interesting to follow developments the past month or so as the candidates for governor weigh in with their proposals for some sort of a reformation.
While we have been tracking some significant increases for homeowners here, it has become a talking-point at the state level after significant statewide increases surfaced last year. According to an analysis by the Association of Indiana Counties and Policy Analytics, the gross assessed value of homes jumped 16.5% on average between 2022 and 2023 and property tax bills increased by 18.2%.
The two-year State and Local Tax Reform joint study committee of the Indiana Legislature initially focused on finding some method of lowering and even eliminating the state income tax. The property tax increases brought that form of taxation to the forefront however. All of this somewhat forced the gubernatorial candidates to feel obligated to offer solutions.
Not sure of the exact sequence, but I think Libertarian Party candidate Donald Rainwater broke the ice with a proposal to replace residential property taxes with a 7% sales tax on real estate transactions with the buyer’s option to pay that over a seven-year period. Republican Mike Braun’s plan would overhaul the Homestead deduction formulae and freeze increases, limiting property tax increases for seniors, for example, to 2% per year. I think. His plan keeps adjusting to criticisms. Democrat Jennifer McCormick packages some ideas that have been floated around the Statehouse the past couple years, focused primarily on providing relief via income tax filings — such as a 40% increase in the homeowner property tax deduction and a 50% increase in the renters deduction. She also proposed to limit all annual increases to 10%.
This page has included a number of analyses of these proposals by state commentators and economists the past few weeks plus a really interesting and informative 50-year historical synopsis of Indiana property taxes by Purdue University professor Larry DeBoer (published Aug. 14 if you missed it).
So I guess it is time I weighed back in.
Braun’s plan was highly criticized for not offering any kind of fiscal analysis — what impact his plan would have on local government units nor how any of that revenue would be replaced. Hence, it keeps changing. It also provided no relief for renters. McCormick’s plan, which was submitted to the Legislative Services Agency to analyze its fiscal impact, was based on several ideas that have been proposed in the Statehouse the past couple years. The problem is, none of them went anywhere. Like most anything a third party candidate proposes, Rainwater’s plan has been widely ignored. Perhaps rightly so in this case.
I have to wonder how capping increases meets the constitutional requirements of market-based assessments and levies, and I have to wonder how much more complex computing property taxes would be if more exemptions, limitations and caps were added. The system needs simplified, not made more complex. One of my favorite quotes of 2024 came out of one of the SALTR task force meetings: “Where there is simplicity, there is accountability,” task force member Rep. Jack Jordan, (R-Nappanee) said while discussing the overall property tax process. “Where there is complexity, there is no accountability.”
I would give McCormick credit for at least referring to that two-year study committee. “They might have some new ideas,” I paraphrase what she told a Statehouse reporter.
Indeed, they might. If I were a candidate for governor, this would have been a no-brainer:
“Candidate Miller, what’s your proposal to address recent increases in residential property taxes?”
“That is an important issue for Hoosiers and you know what? There’s this joint legislative commission that has been studying state and local tax issues for almost two years. I would humbly say they know a whole lot more about this than I do. I understand they will be issuing a report with some recommendations this fall. Let’s see what they come up with and we’ll work on it.”
As you may recall, we’ve been following that commission, in part because of local State Sen. Travis Holdman’s involvement. He was a key player in creating the task force, chaired it for the first year and is now serving as vice-chair.
“We’ve got it honed down to 19 issues we need to address,” Travis told me this week.
“Only 19?” I asked, chuckling.
“Well,” he replied, “I don’t know if the whole group will go along with that. Actually I can come up with two dozen but I’m just one vote.”
The group will have at least two more meetings and is committed to release a plan in mid-November, purposely after the election. He talks about a number of options that include untapped LIT — Local Income Tax — capacity and new utilization of the Property Tax Replacement Credits. “I think we’d like to provide local government officials with more options for local funding,” he said.
A couple things to keep in mind: First, there are rather specific requirements regarding property taxes placed into the Indiana Constitution as the result of a lawsuit 20-some years ago. Any changes will have to accommodate those provisions or the legislature will need to re-amend the constitution. Which would take a while.
Secondly, part of our local analyses the past couple years has included the realization that, compared with other Indiana counties, Wells County’s property taxes are below average. Meanwhile, the Tax Foundation recently released their latest data of property taxes across the nation. Indiana’s property taxes are below the national average by any metric they have. The non-profit think tank rates Indiana’s overall “tax-friendly climate” as 10th best in the nation. Meanwhile, industry magazine Business Insider reported the national median property tax bill in 2023 was $2,690; Indiana’s median tax bill was $1,308.
While it is a fair question to ask whether we really have anything to complain about, we have documented a significant “tax shift” of the local tax burden from non-residential properties to homeowners and rental properties since 2018, almost totally due to assessed values. “Consistency in assessed values” has been one of the biggest complaints. There are also growing concerns about the seemingly never-ending increases in providing government services, most significantly education, law enforcement, emergency medical services and fire protection.
And as we wade through another budget period, when local government units from townships to schools to towns and cities and the county itself set expenditure plans for 2025, I have not been particularly encouraged.
County council found about $800,000 in excess funds and spent a considerable amount of time discussing how to utilize it. I asked Holly Gaskill, who reported on the process, if anyone had even asked whether that might be returned to the taxpayer. “No, that was not brought up,” she told me. However, I learned from a council member Friday that he had inquired and it was investigated “kind of behind the scenes,” he said.
I understand the logistics and costs make that hard to justify, but I’m not clear why it had to be spent.
We went around the boxing ring a bit with Northern Wells Schools officials this past spring, who insisted that by keeping their tax rate the same, it wasn’t their fault that patrons’ tax bills went up by double digits. Choices they made to issue bonds to improve school facilities was an option made possible by the 11.5% increase in the school district’s total assessed value which allowed them to raise that additional money without increasing their rate, which nonetheless raised their patrons’ tax bills.
They are once again making that promise: “We’re committed to keeping our tax rate the same,” Superintendent Mike Springer said during this week’s school board meeting. When 2024 assessed values were mailed out this spring, one Northern Wells patron’s home’s AV went up 44% without any improvements or changes made this past year. Unless they win their appeal, they can already figure on a 44% increase in their property tax bill for the school district’s portion, which accounted for about one-half of their total property tax bill this year.
And regarding a promise to keep a rate the same: Would they/could they keep that promise if the district’s total assessed value would go down or even stay the same?
Meanwhile, the issues creating problems in Jefferson Township and Ossian — the costs of providing fire protection — will eventually be coming to a governing board near you.
Holdman has often lamented that the property tax is a wealth tax, not based on ability-to-pay or consumption. Nonetheless, it is the chief funding mechanism for local government services. Some state observers claim that Hoosiers have sub-par services and if we truly want to attract new residents and keep our young people here, we need to address that. Lowering taxes will not do the trick. Others argue it is a matter of controlling expenses — lower taxes will attract people to Indiana and Wells County.
That’s probably enough to chew on for one Saturday morning. Basically, what I heard from Travis is probably good advice for the time being: Stay tuned.
miller@news-banner.com
