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EDITORIAL: Don't abandon basic services because of tax caps

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IBJ Editorial

The property tax caps that are all but sure to become part of the Indiana constitution after a voter referendum this November are definitely good politics—and might prove to be good policy. We won’t know for sure until we see what becomes of two property-tax funded entities that are starving as the caps fully phase in.

The caps, passed in 2008, now limit property taxes to 1 percent of assessed value for owner-occupied homes, 2 percent for rental properties, and 3 percent for businesses. They were adopted in the wake of the protests that followed huge leaps in property tax bills in 2007.

Property owners were justifiably outraged over tax bills that rose by double-digit percentages. Among the villains in the drama that year were school districts guilty of spending taxpayer money on glitzy new sports facilities. These days, local school districts get their funding from the state. If they need additional money, they can go hat in hand to voters and ask that more be raised through higher property taxes.

Library districts and public transportation systems aren’t so lucky. The state doesn’t allow them to ask for more money no matter how much they need it.

As everyone knows by now, the Indianapolis-Marion County Public Library plans to close six branches to counter the loss of 8 percent of its revenue, a decline it attributes to property tax caps.

Likewise, the city’s transportation-of-last-resort bus system, IndyGo, says it will have to raise fares and slash routes to make ends meet. IndyGo is already one of the least-effective bus systems in the country. It’s hard to imagine it being worse—but if the property tax squeeze forces cuts, we won’t have to imagine. We’ll see it firsthand—rather, those who depend on the system will.

The property tax caps that are forcing these painful cuts aren’t inherently bad. Property owners deserve a reliable measure of what they’ll have to pay—and they need protection from the kinds of increases that can drive people from their homes.

The caps become untenable only if measures aren’t taken to provide alternative funding, perhaps a sales tax increase, for basics like libraries and buses. At the very least, these other units of government should be allowed to make their case with voters, who might be receptive to paying a little extra for things that aren’t perceived as luxuries.

No city that aspires to attract jobs and talent can starve the most vulnerable among its population. For many of us, the local branch library is a convenience. For others, it’s a lifeline to learning and to the Internet, which has become a necessity in conducting our lives.

Most IBJ readers don’t rely on a city bus for transportation, but some of them count on the bus to get their employees to work. For those employees, public transportation might be the difference between working and sinking into poverty.

Property owners shouldn’t have to fund all the basics, and the tax caps guarantee they won’t. The question is, who will?•

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To comment on this editorial, write to ibjedit@ibj.com.

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  • Cui bono?
    According to the Legislative Services Agency, only 4 percent of cap-caused tax credits went to Indiana homeowners last year (when the cap was 1.5 percent of gross AV).
    Yet caps are being sold as a huge benefit to homeowners ... who are losing vital services without other options to fund them.
    Who benefits?
  • So what's the solution?
    Perhaps a meaningful exercise is for different publics to divide their tax coverages into three buckets: 1) We all agree we need these services; 2) Some of us agree; 3) None of us agree on taxes for these services. Could we even come close to filling buckets 1 and 3, let alone argue about 2?

    The editorial first says property tax caps should be in bucket 1 and good for all, but then hedges from there on.

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