LSA Report on Property Taxes

There is an article by Niki Kelly in the Fort Wayne Journal Gazette entitled Tax credits eased pain of change and a similar article by Michele McNeil in the Indianapolis Star entitled, Surprise! Property Taxes Fell for Most. The stories are based on a report by the Legislative Services Agency and everybody’s favorite economist, Larry DeBoer.

The report – given by the Legislative Services Agency and Purdue University Professor Larry DeBoer – examined how tax bills shifted between classes of property as well as what the shift would have looked like if lawmakers had not added $800 million in property tax relief.

“People who see tax decreases don’t say much while people who see tax increases do,” said DeBoer, referring to angry citizens who decried the reassessment. “The reality is a majority of homeowners in Indiana got tax cuts after reassessment and restructuring.”

The 2002 reassessment saw the state move to a more market-based tax value system, as opposed to the former system that depreciated older homes while assessing business property much closer to the market value than residential.

That is why businesses saw little or no increase under the new system and residential homes felt the brunt of the shift.

Tax bills for agricultural land and rental properties went up pretty significantly, 5.7% and 11% respectively.

When studying comparable homesteads – or properties that did not change due to additions or major renovations – almost 58 percent of Indiana homeowners saw a decrease in their tax bill while 42.5 percent saw increases.

Overall, just 5.3 percent saw increases of 100 percent or more and the average change was a $4 savings statewide.

The news would have been far worse if legislators hadn’t passed a restructuring package in a 2002 special session that largely targeted residential homesteads.

According to DeBoer, if the General Assembly had done nothing, homeowners’ bills would have gone up an estimated 51.2 percent and agricultural bills would have jumped more than 20 percent.

“In case there are any homeowners who think tax restructuring didn’t matter, I think we can disabuse them of this notion,” DeBoer said.

Early predictions that average residential tax bills would go up 33 percent were fairly accurate when discounting an unusual 10.6 percent growth in tax levies that year.

Without that – and without restructuring – tax bills would have gone up 35.4 percent.