By a vote of 44 to 5, the Senate adopted House Bill 1478. Voting “no” were Senators Rogers, Simpson, Skinner, Smith, and Tallian. This is Senator Kenley’s bill designed to ease the property tax hit — expected to be a 15% increase if the legislature does nothing — and to shift local government’s reliance on property taxes to something else.
I have to admit, my brain seized up about half way through the digest. It’s been a long day, sure, but i’s also a pretty complicated bill. But, in general, it accomplishes this by having the state assume some of the expenses traditionally borne by local government — such as juvenile detention fees and department of child services fees. In exchange, the state will phase out the property tax replacement credit — currently the mechanism by which the state essentially subsidizes the county property tax burden. It also allows local government to reduce property taxes by replacing them with a county adjusted gross income tax or county option income tax.
That’s my dumbed down version, anyway.
Also, if you want a very readable explanation of why property taxes will probably go up this year, check out the March 22, 2007 edition of Capital Comments by everybody’s favorite economist, Larry DeBoer. His guess (absent action by the General Assembly): a 17.5% increase. He lists five major items that will affect your property tax bill. Among those, there is the issue of trending — currently property taxes are based on the value of the property on March 1, 1999. Assessors are now required to “trend” the property — basically use recent data to adjust the value every year. Year-to-year, that might not be a big thing, but this year, they’ll have to use the March 1, 2005 value — a 6 year jump. There is also the issue of the property tax replacement credit – that big subsidy the state used to pay to local government to reduce the need for property taxes. A lot of the 2004 budget was balanced by substantially reducing the amount of that replacement credit. The State shifted its burdens down onto the counties.
So, I expect legislators to be very motivated to protect their constituents against a 17.5% property tax increase and would, therefore, be surprised if some version of this bill does not pass.
[tags]HB1478-2007, taxes[/tags]
Just because the assessed valuation of every property increases by 17.5% does NOT mean an automatic 17.5% tax bill increase. If the county budget remains the same, the tax rate will decrease by 17.5 thus leaving your tax bill unchanged. Your assessed valuation is used to determine your share of the county budget needs — if everybodies valuation increases equally, your proportion will remain unchanged thus leaving your bill unchanged.
We’re not just talking about valuation here, though. With the property tax replacement credit gone, for example – those are dollars not flowing into the county coffers. If the state isn’t payiing that credit, the taxpayer will.
As far as the trending phenomenon is concerned, you’re probably right — if everybody’s property value appreciated at the same rate, it’d be a wash.
But hasn’t there been a lot of home construction in the past 8 years? Didn’t we just go through some massive building boom?
If there are a bunch of people in exurban McMansions who’ve been paying property taxes as if they lived on an undeveloped pasture, then doesn’t it stand to reason they’re going to get hit with something much stouter than a 17.5% increase?
If not, I would guess some events can cause your baseline prior to this bill to be more recent than 1 March 1999, but I don’t know where the list of such events is published.
New construction would provide for a more recent assessment date. I think there are other events, as you say, but I can’t remember off hand what they are.
Another major factor as to why local property taxes are going up is that the legislature eliminated inventory taxes. This amounted to 15% plus or minus of the assessed value of some taxing units. Thus in order to raise the same amount of revenue there would be an increase in tax levies. Some of the folks in the legislature seem to be forgetting this little action on their part and some blame local units for a variety of things associated with raising taxes. Also forgetting the ever increasing burden of unfunded mandates passed by the legislature or edicted by state and federal agencies.
Just another few words on seeking to understand the property tax situation for some local taxing units—-if farm land is a major component of the total assessed valuation then need to know that farmland was based at $1050 per acre reduced to $880 per acre (these figures to be locally adjusted as to productivity factor) thus with farmland reduced assessed value of about 20% the tax burden is shifted to other properties. Again, no local decision making involved but state mandated. (by the way—farmland goes back to over $1000 per acre for 2007 pay 2008.) So as from above take a reduction of approximately 15% through loss of inventory and a approximately 20% from farmland—-all this means a shift of taxation to other properties. Mr. Deboer’s article does a good job of explaining many things—and an article from Purdue explains “how” farmland assessed values have been determined by a set state formula. All the state rules mean most counties have had to hire outside “experts” just to help with trending and “what to do to be in compliance” with state laws/regulations.
For several reasons property taxes are not always a “good” tax but it is likely the most consistent revenue generator thus offsetting the problems of variations from year to year that other taxation sources might bring.
The new tax bills here in Allen County are out and on average they are roughly 15% higher…
Sorry, I meant to say valuations…