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Saturday, December 12, 2009
Ind. Law - "Proposed property tax caps won't prevent increases in bills" [Updated]
Lesley Stedman Weidenbener's Louisville Courier Journal must-read column for Sunday, Dec.13:
INDIANAPOLIS — As lawmakers begin debating a proposed constitutional amendment to limit property tax bills, I thought it might be worth going over a few of the key details of what the so-called caps would mean for property owners.[Updated 12/13/09] Niki Kelly of the Fort Wayne Journal Gazette had a long story Dec. 10, 2009,headed "Assessed value caps denounced," that began:Regular readers know I’ve written about this topic before. But I was inspired to cover it again last week as members of the House Ways and Means and Senate Tax and Fiscal Policy committees pondered whether homeowners really understand the proposal.
It seems to be a particular concern of Democrats, including Sen. Connie Sipes of New Albany, who say many homeowners believe the constitutional amendment — if passed by the General Assembly and ratified by voters — means their tax bills would never increase.
If that’s what you think, you’ve got to read this column, because that’s just wrong.
Instead, the constitutional amendment, which is being pushed by Republican Gov. Mitch Daniels and GOP legislative leaders, would limit tax bills based on assessed values.
Those limits are already in law and are being phased in over two years. In 2010 — the second year — the tax caps will limit bills for owner-occupied homes to 1 percent of the property’s assessed value. Bills for farmland and other residential property will be capped at 2 percent of assessed value and commercial and other land at 3 percent.
For a home assessed at $100,000, the limits mean a tax bill can’t be higher than $1,000. That is a cap, but it is relative to the assessed value.
If the value increases to $120,000, the tax bill could increase to as much as $1,200. If the value decreases to $80,000, the bill could be no higher than $800.
That means over time, as most homes are likely to increase in value, so can tax bills.
But that’s not the only way bills could increase, even if the constitutional amendment passes.
Most homeowners in Indiana are paying bills that are less than 1 percent of their assessed values. That means their bills could increase up to the limits.
Lawmakers have taken other steps to try to keep property tax bills lower. But they aren’t capped until they reach the 1 percent limit.
And just to make the issue a little more confusing, there are ways to essentially break the caps.
The state law — and the proposed constitutional amendment — allow voters to approve projects or spending that would take their bills higher than the 1 percent level.
If voters approve a referendum for a $10 million school project, for example, the property taxes needed to pay those bonds would not be included in the cap calculation.
Finally, the limits are subject to definitions created by the General Assembly and the Department of Local Government Finance, definitions that can be changed over time.
Swimming pools, for example, aren’t included in the definition of owner-occupied homes. So the tax on a homeowner’s pool, under current rules, is actually limited to 3 percent, which could drive a bill higher than an owner expects.
None of this is to pass judgment on the law or proposed amendment. Instead, my goal is just to make sure that Hoosiers understand what the proposal means to them.
INDIANAPOLIS – Critics uniformly assailed a proposed assessed value cap Wednesday as regressive, unconstitutional and even an “insincere” attempt to curry favor with voters.But authors of the bill defended it as a way to give property taxpayers certainty on their bills – certainty the current property tax cap system doesn’t provide.
Posted by Marcia Oddi on December 12, 2009 04:53 PM
Posted to Indiana Government | Indiana Law