State Government and State Budget and Taxes and Property taxes and Tax Caps and Constitutional amendment and Government & Economic Development and Government

Voters expected to OK property-tax cap amendment

October 31, 2010

There's little question about it — the public question asking voters whether the state constitution should include property-tax limits is nearly certain to pass.

A recent poll found that more than 60 percent of likely voters support the proposed constitutional amendment, and some of the measure's biggest opponents have given up the fight.

Indiana law already limits property tax bills to 1 percent of homes' assessed values, with 2-percent caps on farmland and rental property and 3-percent limits on business property. Putting those caps into the state constitution will make them much harder to undo — a feature both praised by supporters and decried by opponents of the caps.

Rep. Jeff Espich, R-Uniondale, is urging voters to approve the amendment, which lawmakers have worked since 2008 to get on Tuesday's ballot.

"In tough economic times like we are facing, taxpayers need more protection and they need stability," Espich said.

The caps saved taxpayers $478 million this year and are projected to save another $577 million next year, according to an October report from the nonpartisan Legislative Services Agency.

But not all homeowners benefit. Only about 11 percent of homesteads hit the property tax limits in 2010, the analysis said. Even with the caps in state law, property tax bills can increase for property owners whose bills fall below the caps and for those with increasing assessed values on their property.

Still, supporters say the constitutional caps would give homeowners added peace of mind and would prevent shocking increases like those seen in 2007. Property tax bills skyrocketed in much of the state that year because of new assessment rules and other factors, sending hordes of homeowners to the Statehouse demanding changes. The caps were approved in 2008, and the process of amending the constitution began the same year.

Karl Berron, president of the Hoosier Property Tax Reform Alliance and CEO of the Indiana Association of Realtors, said those thinking about making an investment in a home or a business like having predictable tax bills — not the wild fluctuations seen a few years ago.

"That becomes comforting to be able to have some sense of what your maximum liability will be," Berron said.

But opponents criticize the more permanent nature of constitutional caps, pointing out that it would take years to change the caps if unforeseen consequences arise in the future.

Some local government leaders aren't happy about the current consequences of the caps. The 2008 law raised the state sales tax from 6 percent to 7 percent to help pay for property tax relief, but local governments and school districts have faced millions of dollars in revenue losses from the caps. Cities around the state have blamed layoffs and other cost-cutting measures on reductions in property tax cash.

The Indiana Chamber of Commerce and Indiana Farm Bureau don't like the caps because they think it's unfair to treat commercial and residential property differently.

But those two groups aren't fighting the proposal, which they consider a sure thing to win approval.

"It's going to pass," said Chamber President Kevin Brinegar. "We've moved on."

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