Leo Morris goes to a tried and true tool in pretty much any debate over adopting a Constitutional Amendment: “Let the people decide!” Keeping a proposed amendment off the ballot, the argument usually goes, is tantamount to a lawmaker declaring that he or she thinks Hoosiers are too dumb to decide for themselves.
In the case of proposed SJR 1 concerning property tax caps, native intelligence has nothing to do with whether one thinks Hoosiers will fully understand the consequences of the amendment before casting their vote. It’s an ugly, complicated piece of work. I have an unduly high opinion of my own intelligence, and I spend more than an average amount of time reading Indiana legislation. Nonetheless, I’m confident I don’t understand the full implications of this beast of an amendment that is being proposed for enshrinement in our state’s Constitution:
Section 1. (a) Subject to this section, the General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation and shall prescribe regulations to secure a just valuation for taxation of all property, both real and personal.
(b) A provision of this section permitting the General Assembly to exempt property from taxation also permits the General Assembly to exercise its legislative power to enact property tax deductions and credits for the property. The General Assembly may impose reasonable filing requirements for an exemption, deduction, or credit.
(c) The General Assembly may exempt from property taxation any property in any of the following classes:
(1) Property being used for municipal, educational, literary, scientific, religious, or charitable purposes.
(2) Tangible personal property other than property being held as an investment.
(3) Intangible personal property.
(4) Tangible real property, including curtilage, used as a principal place of residence by an:
(A) owner of the property;
(B) individual who is buying the tangible real property under a contract; or
(C) individual who has a beneficial interest in the owner of the tangible real property.
(b)(d) The General Assembly may exempt any motor vehicles, mobile homes (not otherwise exempt under this section), airplanes, boats, trailers, or similar property, provided that an excise tax in lieu of the property tax is substituted therefor.
(e) This subsection applies to property taxes first due and payable in 2012 and thereafter. The following definitions apply to subsection (f):
(1) “Other residential property” means tangible property (other than tangible property described in subsection (c)(4)) that is used for residential purposes.
(2) “Agricultural land” means land devoted to agricultural use.
(3) “Other real property” means real property that is not tangible property described in subsection (c)(4), is not other residential property, and is not agricultural land.
(f) This subsection applies to property taxes first due and payable in 2012 and thereafter. The General Assembly shall, by law, limit a taxpayer’s property tax liability as follows:
(1) A taxpayer’s property tax liability on tangible property described in subsection (c)(4) may not exceed one percent (1%) of the gross assessed value of the property that is the basis for the determination of property taxes.
(2) A taxpayer’s property tax liability on other residential property may not exceed two percent (2%) of the gross assessed value of the property that is the basis for the determination of property taxes.
(3) A taxpayer’s property tax liability on agricultural land may not exceed two percent (2%) of the gross assessed value of the land that is the basis for the determination of property taxes.
(4) A taxpayer’s property tax liability on other real property may not exceed three percent (3%) of the gross assessed value of the property that is the basis for the determination of property taxes.
(5) A taxpayer’s property tax liability on personal property (other than personal property that is tangible property described in subsection (c)(4) or personal property that is other residential property) within a particular taxing district may not exceed three percent (3%) of the gross assessed value of the taxpayer’s personal property that is the basis for the determination of property taxes within the taxing district.
(g) This subsection applies to property taxes first due and payable in 2012 and thereafter. Property taxes imposed after being approved by the voters in a referendum shall not be considered for purposes of calculating the limits to property tax liability under subsection (f).
(h) As used in this subsection, “eligible county” means only a county for which the General Assembly determines in 2008 that limits to property tax liability as described in subsection (f) are expected to reduce in 2010 the aggregate property tax revenue that would otherwise be collected by all units of local government and school corporations in the county by at least twenty percent (20%). The General Assembly may, by law, provide that property taxes imposed in an eligible county to pay debt service or make lease payments for bonds or leases issued or entered into before July 1, 2008, shall not be considered for purposes of calculating the limits to property tax liability under subsection (f). Such a law may not apply after December 31, 2019.
It involves tax policy which is a fairly arcane area of the law. It has an impact on other matters of tax policy which are not printed in the text above. Citizens have other concerns and can’t afford to spend every waking moment educating themselves about the intricacies of all the policy decisions that come before their government, and this is precisely why we have a representative form of government rather than a direct democracy.
The Constitution should be about broad, generally timeless principles and the general outlines of government, not cluttered with the details of uncertain tax policy.
I didn’t even bother trying to wade through all that, because I didn’t want to break my brain before coffee.
My understanding (limited as it is) is that as a general rule, property taxes are inherently more stable than other forms of taxation. Income can rise and fall – people and industries with money can come and go from a state, and people can hide assets they should be paying taxes on. But although it’s value can go up and down, property is visible and stays put, and is therefore a good foundation for the basic finances necessary for government.
Property tax caps as a permanent part of legislation are therefore problematic when the taxes aren’t flexible enough to keep up with the economy – witness the massive instability of California’s budget, where caps have been in place since the 1970s.
I admit I don’t know more than that about taxation. And frankly, it shouldn’t be up to me to make these decisions. That’s why I elect politicians.
Of course we’re stupid. Do you see the idiots we send to the Statehouse?
so the wording of the bill would actually allow the general assembly to make multiple changes or adjustments to the “caps”, even though these are constitutional caps.
As pointed out above, the dangers of tying state revenue needs to anything but property tax as the base has been proven foolish over and over again ( california, michigan, and now indiana). mitch and bosma were told this, they knew better-as always.
I am not an Indianan, but I’ll agree with Doug that insertion of specific law like this into the Constitution seems like a bad idea. We just had the Ohio Constitution modified for the same sorts of specifics in the Casino referendum, which actually names the company that can build the Casino.
I will point out what I see as a huge loophole in the proposed amendment: property being used for educational, charitable, etc… purposes. Note that it says, “…used for…” and not, “…primarily used for…”. So I am Megabancshares, Inc. and I donate $1mm annually to 20 charities. Those charities are decided at my headquarters tower and the money is generated through my 1,000 branches. Therefore, they are used for charitable purpose, and I do not pay tax on them. Likewise, I have IU conduct MBA classes in my tower. Educational purpose. I do not pay tax.
Granted, that might border on the absurd, but when you put that language in the constitution and not let the Legislature and Administration determine enforcement and rules, it is what you get.
Whenever one feels confident that the voters would approve something, they rely on, “Let the voters decide”. When the opposite is true, “The people were smart enough to elect representatives that will make the right decision”.
This is vastly less complex than the proposed health care bills. The latter are not proposed Constitutional amendments, granted. Same dynamics in play.
It just seems to me that ‘caps’ in this manner may be setting us up for state government to be advocating for inflation of property values in order to raise revenues at some future point. Do we really want government advocating in such a way to create more bubbles? That becomes destructive when the bubbles burst, as the ‘free market’ has so recently and painfully taught us.
Theoretically if you had a house next to a hot area and the market value went sky high, even with the cap your taxes could go up to a point where you could not pay them, unless you sold the property.