So, how much of the furor over increased property taxes I’ve seen in the Indiana blogosphere has to do with Marion County’s failure to plan ahead?
For the furor, see:
here
here
here
here
here
here
However, as Advance Indiana notes, among other things, Marion County apparently failed to pass a County Option Income Tax to offset the elimination of the inventory tax. That’s a pretty big deal, meaning that all of the revenue that used to come from inventory tax payers has now devolved onto other property tax payers in Marion County (and similarly situated counties). It makes me wonder how much of the pain in Marion County could have been avoided with some advance planning. It also makes me wonder how bad things are outside of Marion County. Unless this is a problem counties around Indiana generally have found themselves incapable of dealing with, I’d suggest that Indianapolis Mayor Peterson’s requests for a special session of the General Assembly be declined. That property taxes were going to increase substantially was no mystery during the regular session. The General Assembly took action, albeit well less than perfect action. Now, I figure they’re obligated to let the dust settle and revisit the issue next January.
Abdul says: “You know it would be nice if someone would put out a news release saying “we’re going to spend less money so Hoosiers can pay less in taxes!” That would be news.”
That’s easy to say. But, I’d like to first know how much spending has actually increased relative to inflation. My sense is that it’s not much of an increase. I’d also like to know which government services should no longer be provided.
The primary reasons for the high increases in property taxes recently are: 1) Elimination of the inventory tax – former inventory tax payers are paying less, so other property tax payers, including residential homeowners have to pay more. Counties were given the ability to implement a County Option Income Tax to offset the inventory tax reduction; basically you replace the revenue with income taxes instead of property taxes; 2) Reduction of the homestead credit and property tax relief credit – state subsidies that took the burden off of property taxes. These credits were provided out of a recognition that the state imposed large burdens on local taxes and also imposed significant restrictions on local taxing powers. These subsidies were reduced in an effort to balance the state budget and, effectively shifted the problem to local government and property tax payers; and 3) Changes in assessment rules – years ago, taxpayers brought a lawsuit arguing that the assessment rules unfairly and artificially underassessed some properties and overassessed others. The Supreme Court agreed and required something resembling market values be used for assessments. As a result the relative tax burdens shifted, with the underassessed property owners having to pay more and the overassessed paying less.
So, generally speaking, the dramatic rise we see in property taxes is less a matter of local government spending gone amok, and more a matter of shifting tax burdens. (You can expect those whose tax burdens went down to keep relatively quiet). Also, in some cases – such as, apparently, Marion County, this already difficult situation was made worse by failure to use available tools, such as the County Option Income Tax.
Bats Left Throws Right has a much more entertaining explanation of much the same thing.
[tags]taxation[/tags]
Very good analysis of the problem. It sounds like an exacerbating factor in some counties (check out AI for discussion about this in Marion County) has been failure to accurately assess commercial/industrial properties as well.
The City of Fort Wayne’s tax rate is actually down 5.6% but residential property taxes in Fort Wayne have still risen between 10% and 20%. In the Aboite suburban area of Fort Wayne, a combination of being newly annexed and a rise in school taxes (Southwest Allen County Schools) will increase their taxes by a reported 57%.
HB 1478 gives local governments a couple of options to raise local income tax for property tax relief, but in Fort Wayne/Allen County I do not see how the majority of taxpayers receive a net benefit. Even if the property tax relief is just limited to homeowners in order to maximize the property tax cut (and how fair is that, when renters pay income tax), you have to be a person of fairly low income AND own a very expensive home for the deal to make sense. Plus, due to the weird way the State law sets it up, the Fort Wayne City Council effectively sets income tax policy for the entire county. This is sort of like the bad part of unigov with none of the benefits. But that is the subject of a different conversation.
Doug, the one constant in this is spending. The variables are, “who shall pay”. It’s a shell game whereby the inventory tax goes away and the property tax goes up. If the statehouse intervenes somehow, the property tax goes away, but what will replace it? Certainly, in my opinion, something will replace it, because while the people are now drawing the line on property taxes because they could become homeless, they have yet to draw the line on spending. I certainly haven’t heard it popularly enunciated.
If I were named benevolent dictator of Marion County, I would place an immediate moratorium on all spending except genuine essential services: public safety, courts, hospitals. I would force everything else to be examined and ranked in priority. Once ranked, the allocations go out. If there isn’t enough money for the items at the bottom of the ranking list, they fall.
Once again, though, we see why people like me flee the old urban centers. They are just suckholes that are to be avoided.
What is the situation like in other counties? I have heard about Lake Co in the past. Now we hear Allen and Marion. What about Tippecanoe? Have I just somehow missed this?
Bats Left Throws Right has a much more entertaining explanation of much the same thing.
It’s easier to be entertaining when you go off half-cocked, but thanks for the plug anyway.
I’m growing ever more concerned with the timbre of the coverage. Tax Revolt! Boston Tea Party! People might want to go back and check out what that accomplished in California twenty years ago.
Talk all you want to about spending, as though there were hundreds of millions of dollars in frivolous, wasteful programs out there, but the fact is that property taxes pay for things people want, and need. There’s not a whole lot of fat to trim off the IPS budget, and we’re struggling to pay police and firemen’s pensions. Not to mention the fact that Stevie Goldsmythe nearly lost his third term to None of the Above when he didn’t keep the streets plowed. A county option tax would have saved me a few bucks. What would have prevented sticker shock is an honest deal from America’s Third-Worst State Legislatureâ„¢.
If elimination of the inventory tax was a sound financial idea, where’s the payoff? Why’s my milk cost just as much, why didn’t I get a big raise, why can’t I buy a car at those February Beat the Taxman prices all year ’round? (Okay, I know the answer to the last one.) If, instead, it was an ethical argument then there was an ethical responsibility to cut spending equal to the reduced revenue or specify what taxes were to be raised. Which, of course, the Legislature wouldn’t go anywhere near. Somebody got a break from the eliminated inventory tax (aside from the people who rake in lobbying fees and campaign contributions, I mean). I just find it curious that none of them lives in a $1 million shack on North Meridian.
As I understand Pat Bauer and his legislative friends structured the the property tax issue to have a “rebate” / refund..or whatever you name you wish to apply. This was done so ” we would remember who did the “rebate”. I am certain that the public will not soon forget where and who generated the tax issue. This logic has the same level of thinking as hitting someone over the head with a 2×4 and then saying I am going to give you something to ease the pain and also some bandages. You are still wounded and bleeding. Why not net the tax to the bottomline and avoid all the extra pain of administrative costs that result and the pain for people having to come up with an even larger sum up front. Just hit them with the 2 x 4 a little softer. While you’re at it, take a few dollars and get Pat Bauer a better roadkill for his head. Personally, I am looking at voting against any incumbent and I am certainly considering goign back to being an independent. Where are the educated, fair thinking and logical people we need as leaders. We whould all be ashamed of voting in “leaders” in our General Assembly.
Lastly, I am concerned with the major ramifications that the tax assessments will have to Indianapolis. I fear some exodus will be launched to go to out lying communities where public schools are perceived to be better.
There really seems to have been little thought put into the changeover (from inventory tax to property tax). And what happened to the estimated 24% increase we have been hearing about all along? From the heart of Center Township (urban Marion County)… I’m feeling lucky that my taxes only went up 41%. Two neighbors had theirs go up over 100%. Ouch!! And I’m not even willing to say that the amount I will now be paying is unreasonable – but the sudden hit will do a lot of damage to housing in our area as most of the people are on very tight budgets. When added to the blatently absurd policy of extending too much credit to people who can’t afford the houses they are in… I see our foreclosure rate going even higher (two houses on my one-block-long street in the last year).
I don’t really know, but my guess would be that Marion County had a lot of inventory tax supporting the tax base. Marion County also probably has a lot of old but reasonably nice residential properties – these are the ones most likely to be reassessed through the roof. But, like I said, just a guess.
In Tippecanoe County, it’s my understanding that the county option income tax has done a good job of offsetting inventory tax revenue losses. I’m biased, but I think we have a lot of really outstanding government officials in the county and that has done quite a bit to lessen the pain in my neck of the woods.
A couple of comments:
1. The legislation was passed by the Republican Senate and the Republican Governor as well as the Democratic House. So, there is plenty of bipartisan blame (or, theoretically, praise) to go around.
2. The State doesn’t have the money for the rebates yet. They have to sell the slot machine licenses first.
Doug, “old but reasonably nice residential properties” … well… my house *is* old (at least compared to me!) built in 1923, but at 1100sf with no garage it isn’t anything fancy. I’m just happy I’m in a house I can easily afford – many of my neighbors (in the same style of houses) can’t and the sudden substantial increase in taxes will hit them hard.
And yes, I think the inventory tax bit did us in the most.
Rebate? Nightmare of stupidity.
I guess the point I’m trying to make is that I wish the media would stop focussing on the $668,000 house that is now suddenly assessed at $1,000,000. Although that *has* to hurt, it’s hard to get behind it.. you know the owner will come up with the additional tax funds.
What I feel for is the 78-year-old widow across the street whose house goes from assessed value of $37,000 to $55,000. True, the $55,000 number is closer to the actual value of the home, but the house is already crumbling into disrepair because she doesn’t have the money to fix it up. I’m quite sure she does *not* have the additional $300 for the tax increase.
Some very good and basic points brought out by several of the posts including Doug’s short version of “how we got here”. Now, the multi million dollar question—does anyone see the legislature “fixing” the problem(s) including less reliance on property taxes, not mandating local governments to do something without alternative funding, etc. I have been involved in local government (as taxpayer and office holder) over many years and can say with some confidence that local officials hands are tied (taxation—what can be taxed, how it can be taxed, how much it can be taxed, etc. are all state set decisions; mandates, laws, and rules that require local compliance; and on and on). The current mess with property taxes was a direct result of state decisions. Does anyone see a possibility of having legislators that will forget party lines and vote to address alternatives such as higher income taxes and sales taxes on a state wide basis —local fixes on these would do little good in some counties with high percent of agriculture, low per capita income, no large industrial base and not a shopping hub.
Maybe we just day dream a bit about alternatives.