Apparently the House Ways & Means Committee made some big changes to pieces of the tax restructuring plan going through the Indiana General Assembly. Bill Ruthhart has the story for the Indianapolis Star. The biggest change was to SJR 1 which would amend the Indiana Constitution and engrave property tax caps into our founding document. Before the committee changes, the plan was to cap property taxes at 1% of the assessed value for owner occupied residential properties, 2% for other residential properties, and 3% for business property. Under the changes recommended in the Ways & Means Committee, the cap for owner occupied properties would be 1% of the household’s annual income.
Rep. Crawford, chair of the committee, said that basing the cap on income rather than on assessed value of the property was fair because of the increase in the sales tax which is supposed to pay for all of these property tax reductions. Sales taxes will fall disproportionately on the poor and so, the argument goes, the strongest property tax protections should be provided to homeowners with the lowest household income.
We’re in uncharted waters here. I don’t know that anyone has numbers that can project how this affects taxpayers or how this affects revenues. I don’t see it ultimately passing the General Assembly — at least not this year — because there are a lot of variables nobody can put numbers to. However, I think it does help to underscore that the property tax restructuring under consideration *shifts* taxes from property tax payers to sales tax payers. Whether there is an overall reduction in taxes is much less certain. And a sales tax has the potential to be a more regressive tax than a property tax. I seem to recall that Gov. Daniels is on record as opposing a graduated income tax as a means of replacing lost property tax revenues.
Niki Kelly, writing for the Fort Wayne Journal Gazette, has the story as well. Her article has a variety of critiques:
Rep. Eric Turner, R-Gas City, said that because his wife is a stay-at-home mom with no income he would just put his house in her name and avoid property taxes altogether.
And Rep. Dan Leonard, R-Huntington, pointed out two identical houses sitting side-by-side could have vastly different tax bills based solely on the income of the owners.
Rep. Leonard’s point doesn’t really carry much water: First, it’s always possible for two families, living side by side, to have wildly different tax burdens. Second, the whole point of this property tax exercise is to cap properties at different levels — under the Republicans’ preferred plan, a rental property sitting next to a owner-occupied property could be taxed twice as much.
Rep. Turner is pretty much just showing us he’s a tax dodge.
None of which suggests any particular strength to the amended version; just the speciousness of Leonard and Turner’s arguments.
What is the sum of 3 + 2?
Let’s try 4!
How about 7?
I think 6 sounds good.
I say we go with 9.
Let’s put it to a vote!
Where are they getting this stuff? Are there no mathematicians and economists in our state?
This is what bothers me about the Indiana Democrats – they have no original ideas, they just heave stuff out there with no thought for how it will actually works. They seem far more interested in the political game. They put the same effort into their ideas that Britney Spears puts into making sure she has underwear on.
I mean, let’s go through Niki Kelly’s article. She didn’t think too highly of the change herself:
And they want me to vote their party into the Governor’s office?
This is an interesting proposal. I have been trying to find out if the graduated hometead credit is still in the bill. If it is that would be a better way to do it. Does anyone know?
This is the most retarded thing I ever heard.
Didn’t this guy meet with all those public employee unions last week who came to Indy to whine about the tax caps? And now Democrats want to cut the cap even more?
I think that 1% for homesteads it too low, to now cut it to 1% of income is just crazy. Why not go whole hog and just exempt homesteads from property taxes altogether?
This ammendment would cut my taxes by about $8000 from the current 2% cap. That’s insane. How is government going to operate on such a cut?
I’d like to something clarified. Is it total household income that would be considered, or just one wage earner per Rep. Turner’s example.
Maybe you can judge the merits of this tax plan… instead of taxing property on accessed value or income, tax only on the square footage of living space of your home and the acreage of your land. A certain rate per square foot and per acre. Seems like an objective, clean and simple method as it’s not subjective to someone’s ill informed opinion as to the ‘value’ on my property.
I have seen that it is based on TOTAL household income so transferring ownership would not work.
And I don’t know that this is a good idea, but it is worth discussing. People argue that property tax are not reflective of your ability to pay – well this proposal would be sure to make your tax bill fit within your ability to pay.
However, it would be disastrous for local governments to try to create a budget.
It is retarded.
It hits two Democratic constituencies right in the nose: public employees and two income couples.
Why on earth would Democrats be for this? Because they’re the stupid party.
Think the point of what Leonard was saying was the equivalence and fairness issue that got us into this mess in the first place and caused all this talk of property tax reform.
Two identical, both-owned houses sitting next to each other would have vastly different tax bills.
We’re not talking about a rental sitting next to an owner-occupied house, with a commercial business on the other side. No.
Hypothetically: My house is exactly the same as yours. We both live there. But under this whacked proposal, the taxes I have to pay on my PROPERTY are completely different than what you pay on your PROPERTY because of our money-making differences – see, you’re a lawyer and I’m a grocery store cashier. However, I save my hypothetical money and you don’t, therefore I can afford to pay whatever the tax bill is and you can’t.
There’s just nothing reasonable about this plan. With that, we better keep the township assessors since we’ll need flunkies to wade through income documents and determine what each household makes.
Stupidity. Utterly.
Regardless of the merits, or lack thereof, of the plan to base the cap on the income tax, I think Leonard’s argument is specious. Yes, the property taxes on identical, side-by-side houses will be different based on income, but what of it? Under the Daniels plan, the *same* house would have a different tax rate if the property owner sold the property to a renter.
This reminds me of the old joke where the punchline is “We’ve already established what you are, now we’re just haggling over the price.”
Why all the anger about this “tax cap” wording considering the politicians always intended to eliminate it from the final tax bill anyway?
Crawford has been building the case for the tax cap elimination by parading schools and local government opponents in his committee meetings the past couple of weeks.
Please remember:
A property tax shift to sales tax is not a tax decrease.
A local income tax increase is not a tax cut.
A property tax cap is not possible without a decrease in government spending.
Taxpayers should be angry at the entire tax crisis solution considering it is actually a tax increase.
Just add 1% to the sales tax on the accessed value of your home or the value of a new car to see how this adds up.
The idea is you’re taxed on the value of property, and all property is supposed to be assessed & taxed equally. What your income is should be secondary to how much property tax you should pay.
It’s akin to gas taxes being higher if you buy a “non-American” vehicle. What make the vehicle is should have no bearing on the gas tax you pay.
Crawford’s big concern is protecting the wasteful Center Township trustee in Marion County.
I answered my own question on the graduated homestead credit. Somewhere it dissapeared from the HB. I could not find the ammendment. Now it is 35% credit for a home up to $600,000. 25% for a home over $600,000. Come on..
So yes I support this.
But then again I would be happy if all this went away. We are shifting the burden to the poor and rural parts of our state.
Just spewing random thoughts here:
Property taxes are a matter of public record. Through this latest debacle, at least, in Marion County, it has even been made readily assessable on the net (assessed value and actual levee). Does this mean my income (or at least income bracket) will now be posted as well? Or will property taxes be removed from the public eye?
How many more people and offices will have access to sensitive data?
If we are moving the funding from property to income, why limit it to just income of property owners (or “property owner households”)?
And just what *is* a Property Owner Household?
As an inducement to not get married – do you put the house in the name of the person who doesn’t work or makes a lot less than the other?.
Is the investment income or annuity of an aging parent up for grabs if they move in with you?