At long last, Gov. Daniels has announced a tax plan. According to his announcement, property taxes on residential homeowners would be limited to 1% of the home’s assessed value and would receive an increased homestead exemption. Taxes on residential rental properties would be capped at 2% and at 3% for business properties. Gov. Daniels would also like to raise the sales tax 1% to pay for these caps and dedicate certain gambling revenues to property tax subsidies.
Furthermore, property tax replacement credits to local government would be eliminated, but the state would assume school operating and transportation costs. Local governments would still be required to pay for the physical school structures and, under the Daniels Plan, more red tape would be placed on taxing decisions by local government.
I don’t have any strong reaction to the plan, probably because I don’t understand it well enough. A lot of it looks like legislation Sen. Kenley was looking for last year, so it’s probably not all bad. For my part, I’m not so much leery of Republicans trying to screw Democratic constituencies on this one; but I am worried about the State looking to solve its problems by screwing local government (see, e.g. the “balanced” 2005 state budget).
The Indiana Chamber of Commerce seems to be awfully cautious about the Daniels Plan at this point. And, that stands to reason. A significant part of the recent increase in property taxes for residential homeowners comes from shifting the burden away from business property over the past decade.
Ruth Holladay has commentary on the Daniels Plan. I have to disagree with her when she says, “But Daniels, like him or detest him, seems ahead of the game.” It took him 3 years to do squat about the property tax issue. Calling that “ahead of the game” is ridiculous.
Other commenters:
Abdul
Taking Down Words
Hoosier Pundit
“Ruth Holladay has commentary on the Daniels Plan. I have to disagree with her when she says, ‘But Daniels, like him or detest him, seems ahead of the game.’ It took him 3 years to do squat about the property tax issue. Calling that ‘ahead of the game’ is ridiculous.”
That’s highly disingenuous; property taxes rather have to be an “issue” before you can criticize someone for doing squat about them.
That’s like my house getting leveled by a tornado, but then saying that I did squat about the issue of high winds for the three years I owned it before it was flattened.
In this case, though, the wind has been howling outside for the better part of a decade. Gov. Daniels isn’t the only one to blame by a long shot. But he also can’t be characterized as having been proactive.
Heck, I was even citing everybody’s favorite economist, Larry DeBoer, on the subject more than two years ago: here, here, and here.
After the 2005 session, the Indy Star noted that the 2005 budget “sets up likely property tax increases for many homeowners.” The reason this happened is that the 2005 General Assembly “balanced” their budget by passing costs along to local government, reliant on property taxes.
I don’t know where I said that the governor was proactive (a very different claim than refuting the “doing squat for three years” line),
Just how far do you think he would have gotten if he proposed implementing his new plan in his first State of the State address in 2005?
I suspect that a lot of people–bloggers too, even–would have criticized him for leaving a great many issues unresolved (like, say, budget shortfalls or lagging infrastructure investment or his campaign promise to address Daylight Savings Time) at the expense of something seen at the time as being of relative unimportance.
I am not surprised that most of the Democratic talking points on this (and this is a general observation, not a criticism of you in particular) from the state party and from their gubernatorial candidates are entirely backward-looking; it is rather symptomatic of a political organization that hasn’t looked to the future (save their immediate political future) in almost two decades.
They would rather gripe that the governor didn’t do anything when it wasn’t a crisis, instead of answering what he is doing now (or coming up with a similar comprehensive plan of their own).
They certainly were not listening to the wind howling outside when they undertook half-measures and kicked the can down the lane for sixteen years, but I digress.
Anyhoo, you cited one post referring to a study of property tax bills in 2002, another estimating increases as being in the mid-single digits, and another warning that property taxes might go up because of insufficient tax revenue from casino gaming.
That’s rather hard to characterize as being proactive either; difference between a blogger and a governor, one must suppose. ;)
Oh, I’m certainly not proactive on this. So, if Ruth Holladay said I was “ahead of the game” on this, I guess I’d think that was ridiculous too.
I would’ve liked to have seen Gov. Daniels get a little more involved with Sen. Kenley and the others who were working hard on this in the 2007 session.
It’s pre-coffee, so my recollection is a little vague, but wasn’t it a property tax relief bill that Craig Fry jammed up?
Anyway, Gov. Daniels certainly isn’t alone among the people who didn’t do all that they could as early as they could on this.
I’m just getting my arms around this, but it sure looks like a shell game. The issue is local spending, so the state’s intervening? Can’t be good. I would have liked for Daniels to have shown some leadership and to have urged local governments to get it under control.
I really don’t like statewide control of greater aspects of education, which should be a community effort. I guarantee people will resent the feeling that they are subsidizing kids in other places out of proportion to what they believe is coming to them.
Local spending has been a relatively minor component of the recent tax increase. The major components have been –
Reassessment & trending – meaning a shift from business property to residential property.
Reduction or capping of the homestead or property tax replacement credits — essentially, the state balancing its budget on the backs of local government, in effect, balancing the state budget with increased property taxes.
Seems like there is a third, non-local component, but I don’t have time for research at the moment.
Ah, just as I hit “submit” — elimination of the inventory tax – essentially another shift from business to residential.
Didn’t Daniels try to do something *at his first state of the state* when he proposed the one-time tax hike for the very rich?
The Republicans shot it down, but I do remember him trying something right away.
The income tax increase he proposed initially was to balance the state budget – nothing to do with property taxes.
Except that it’s all intertwined. Instead of the tax on “the rich,” (incomes over $100,000 or something like that wasn’t it?) – the General Assembly ended up “balancing” the budget by cutting payments the State made to local governments, payments that partially pay for requirements imposed by the State. Absent those payments by the General Assembly, property taxes pick up the slack.
Simply look at all the players and you’ll notice Daniels is just about the only one who hasn’t been around for DECADES while this problem festered every few years. Slinging mud at the only guy who has offered a substantive plan because he didn’t “do squat” hardly seems warranted.
The most telling part is to see who the detractors are and what their reaction is. That alone shows this plan is headed in the right direction.
Hey, if it makes y’all feel better, I heard on Chicago news that Cook County (the county that includes Chicago) is adjusting their property tax cap to 7% of assessed value, along with raising the gasoline tax, sales tax, putting a $0.10 tax on each bottle of bottled water, etc.
Ultimately I hope the local schools and governments don’t suffer from this one.
Still, Holladay is simply wrong when she says that Daniels is “ahead of the game.”
And, I think Sen. Kenley has offered substantive plans in the past.
We still have a two-term limit on the office, right? So that if Governor Bad Motta Scoota somehow manages to get reelected it’ll mean there’s no more than four years, tops, left of this “Mitch Daniels, bold, forward-looking problem solver unfairly demeaned by jealous political rivals” bs?
1) The 2005 budget was no more balanced than the 2004, with the distinction that it substituted sloughing off taxes onto localities for delaying required payments, which some of us consider, oh, underhanded is a good word choice. At any rate, either Daniels hasn’t balanced any budgets or the previous budgets were balanced as well, so there’s no argument that he inherited a disaster and was forced to solve it. 2) We’ve been arguing over property taxes since the days when Indiana was an agricultural state dotted with manufacturing centers. You can look it up. Problems do not suddenly go “on the clock” just because someone finds a way to make hay out of them. 3) Our congenial host has spelled out precisely the factors behind the most recent increase in property taxes, with an emphasis on the one he left off at first. The Republican-controlled Statehouse eliminated inventory tax and made no provision whatsoever for its replacement. Its elimination does not seem to have sparked a hiring mania or comparable income-tax revenue increase. 4) Daniels ran as a fiscally conservative, budget-squeezing, business executive with years of experience screwing-up the national economy. This was not some bit of arcana hidden away in a 10,000 page budget. It was well-remarked on at the time, and it was simply blown-off. He does not bear sole responsibility, but he bears much, and this nauseating refrain about his “leadership” is entirely unjustified.