2010 Gen Assbly and Gov pg 1

Caston School Corporation will host a “Constitutional Property Tax Caps Discussion Panel” on Thursday, December 3, 2009 at 7:00P.M. in the Cafeteria of Caston Schools. Appearing on the Panel will be State Senator Randy Head and State Representative Doug Gutwein.

Watchdog Indiana is sponsoring the event and the moderator will be Aaron Smith, Founder, of this organization. The purpose of the Discussion Panel is to educate Hoosiers regarding the constitutional property tax caps in Senate Joint Resolution 1. It is expected that the state legislators will factually answer any question to the best of their ability regardless of their personal position on SJR 1.

The format of the Discussion Panel will focus on opening and closing comments by the Panel members with 45 minutes of audience questions in between. The desired result is an even-handed and balanced presentation of SJR 1 facts built around the answers to questions asked by audience members.

A particular invitation to attend is extended to local government officials, including school corporation officials, since tax caps have ramifications for local government funding.

Caston Schools are located at 9815 South State Road 25, Fulton, IN 46931. The Schools are located about ten miles south of Rochester, IN or about 12 miles north of Logansport, IN.

Contacts:
Russell Phillips                                  Aaron Smith
1306 W. State Rd. 114                        2625 Countryside Dr.
Rochester, IN 46975                            Lebanon, IN 46052
Tel: 574/857-4875                                Tel: 765/891-1439
www.castoncomets.org

Tax Caps Threaten Services (Editorial, Ft. Wayne, The JG, 10/12/09)
(This editorial was originally published in The Journal Gazette of Ft. Wayne, IN on October 11, 2009. Bold type and highlighting have been added by the Webmaster.)

Fort Wayne police officers weren’t happy when city officials began charging them for personal use of take-home cars. Imagine how they will feel if city officials are forced to reduce the number of cars – and the officers along with them.

It’s a very real possibility as the full effects of Indiana’s property tax caps are realized. Muncie officials shuttered fire stations and cut 32 firefighters and five police officers this summer. They also reduced hours at city hall and announced the city animal shelter would no longer take animals surrendered by owners. The Muncie Public Library shut down two library branches, and there are concerns that the city’s only public swimming pool, closed for repairs this year, will not reopen.

The severe budget cuts were necessary because of Indiana’s property tax circuit-breaker, which this year capped taxes on homes at 1.5 percent of their assessed value but will drop to 1 percent next year. While they represent a property tax break for some, the tax caps will ultimately represent cuts in services for all.

“The effects of the circuit-breaker are yet to be seen, and I suspect they will be more shocking than anticipated,” said Kurt Zorn, professor of public and environmental affairs and associate vice provost at Indiana University-Bloomington. He’s also the former chairman of the Indiana State Board of Tax Commissioners.

“We have this disconnect between taxes paid and services received,” Zorn said. “People are going to begin to see the connection and are going to have to make some choices in what services they expect. I think this is inevitable. We may actually see some taxpayers asking for their property taxes to be increased.”

When it comes to services residents have come to enjoy and to expect, it’s not unthinkable. Residents in the West Lafayette Community School Corp. held a fund drive this year to bring back six teachers laid off because of budget cuts. They are now planning a referendum to ask for a property tax increase – one of about a half-dozen school districts proceeding with referendum plans.

While Hoosiers have yet to see the worst effects of the tax caps, neither have many homeowners seen any benefit. For 2009 tax bills, only 61 homeowners in Allen County received a circuit-breaker credit – all for owner-occupied homes assessed between $301,000 and $1.9 million. The owners of median-priced homes are unlikely to see much benefit because the $45,000 standard deduction, a supplemental homestead deduction of 35 percent of the remainder and a $3,000 mortgage deduction will likely keep tax bills below 1 percent of their homes’ assessed values. In the meantime, all taxpayers have paid more as part of the property tax overhaul that increased the sales tax rate from 6 percent to 7 percent.

The issue is critical now because the Indiana General Assembly is set to make the tax caps permanent by carving them into the state constitution – a measure Zorn said is bad policy.

“First, we have made so many changes to local government finance, we need to see what the effects are before making this permanent,” he said. “That’s a logical procedural request. From a conceptual perspective, why are we putting tax policy in the constitution? Tax policy needs to be flexible.”

Zorn knows the response from tax cap supporters is that the tax break needs to be guaranteed. He doesn’t agree.

“I know people say we can’t trust our public officials,” he said. “I have a greater trust in democracy. I believe like-minded people will join together and vote someone out of office if they believe taxes are too high.”

Lawmakers should show the same trust in voters and reject the constitutional amendment to make the caps permanent.

Property Tax Caps: Amend State Constitution? (Bloomington, IN Herald-Times, 10/13/09)
(This article by Mike Leonard of the Bloomington Herald-Times was originally published in the HT February 4, 2009. Later it was published here. Bold type and highlighting have been added by the Webmaster.)

Feb. 4--State Rep. Eric Koch, R-Bedford, throws strong support behind Gov. Mitch Daniels and the push by Republicans to amend the Indiana Constitution to include property tax caps.

"I think it's very important we vote this out this year," Koch said last week. "If we don't, I think it sends the wrong message to local units of government, which we have asked to take a very strong look at their budgets."

Area Democrats say there is no need to take up the proposed constitutional amendment in the current legislative session and argue that by waiting a year, there will be more solid information available to determine how the major tax restructuring enacted last year is working, and whether cities, towns and schools are receiving adequate state support.

"If it's a good idea now, it will still be a good idea in 2010 when we will have additional data," said state Rep. Peggy Welch, D-Bloomington. "It just doesn't matter whether we do it this year or next, because either way, the earliest the measure could be presented to the voters in a referendum is 2010."

"The caps are already in place, and I think that's something people are missing in this discussion," added state Sen. Vi Simpson, D-Ellettsville. "The caps are already in state law, so before we go amending the constitution, I think it only makes sense to have more data, not less."

The General Assembly passed sweeping property tax legislation last year in reaction to taxpayer furor in some counties, especially Marion (Indianapolis), where some homeowners saw property tax increases of 100 percent or more.

The increases occurred because of a judicial ruling, ordering that Indiana revamp its property tax system to reflect the current market value of homes and properties. Monroe County phased in the increases to lessen the economic impact on taxpayers. Marion and several other counties hit taxpayers with huge increases all at once, and launched a property tax revolt.

The Legislature lowered property taxes, historically an important component in education funding, and increased the sales tax as a result. And it put caps on any future property tax increases, creating a structure by which homeowners will pay no more than 1 percent of the value of their homes. Owners of rental property and farm land will pay no more than 2 percent of the assessed value of their property and owners of commercial real estate will see their property tax bills capped at 3 percent, under the system currently being phased in.

State Rep. Matt Pierce, D-Bloomington, said he's concerned that people don't understand that the caps represent the most a taxpayer would ever pay in property tax annually. "The projections we got from the Legislative Services Agency showed that only about 1 percent of properties in Monroe County would be anywhere near the cap," he said. "Ninety-nine percent of the people in my district are not going to be near the cap."

That potentially could change should home and property values plummet, however. Tax rates could have to increase to meet the approved tax levy, which governmental units use to compose their budgets.

Hoosier Democrats aren't the only ones with "let's wait and see" attitudes about the effect of last year's tax restructuring and the effort to make the law harder to adjust or repeal by inserting it into the state constitution. The Indiana Chamber of Commerce and the Indiana Farm Bureau -- normally allies of Gov. Daniels and state Republicans -- are against a constitutional amendment.

"Our membership and our board of directors are simply maintaining our position that we are opposed to the proposed constitutional amendment as it stands," chamber executive director Kevin Brinegar said on Monday. "We support the current 'uniform and equal assessments and taxation' language (in the Indiana Constitution) as it stands."

Brinegar said that while the chamber supports the governor and works side-by-side with him on most issues, the 1, 2 and 3 percent classifications create additional disparity in who carries the tax burden in the state. "Business is, for example, about 40 percent of the assessed valuation and ought to be paying 40 percent of the property tax bill. It's already way higher than that," Brinegar said.

"By eliminating the uniformity clause in the constitution, after this administration is gone, another one could push to enact further reductions and exemptions for nonbusiness property and make the relationship between the two even larger than it is now," he said.

Indiana University professor Kurt Zorn agrees with the chamber spokesman on this issue. "Clearly, it's a back door way of doing some classification of property," he said. "They're just caps, for now, but what else do you call it when you are creating different rules for different types of property?"

Zorn's specialties include research into state and local finance. He has served as chairman of the State Board of Tax Commissioners.

"My larger question is, why in the hell are we putting tax policy into the constitution?" he asked last week. "I don't think we should be setting any policy by putting it into the constitution. Times change. Right now, we're in a serious downturn in the economy and we want to take arrows out of our quiver?"

Zorn said just as it takes two separate sessions of the Legislature and a referendum vote to amend the constitution, it also will take at least four years to undo the constitutional amendment, should it pass. "I love the property tax, because it's a stable and predictable source of revenue," he said. "If this is a sustained recession, I worry about our ability to fund schools. Our tax system should be as diversified as possible to include sources of revenue that are more stable when there are changes in the economy."

A study published by the nonprofit Center on Budget and Policy Priorities addresses the problems associated with caps such as the ones passed by the Indiana Legislature last year. "While such caps may hold down property taxes, they are likely to impair local governments' ability to provide education, public safety and other services residents demand and need," it reads. "They also are likely to make the local revenue system more regressive."

The 2007 study reported that since California passed its sweeping property tax freeze in 1978, school districts have cut programs including music, physical education and art, reduced class offerings and eliminated staff positions including librarians and counselors. It also said caps have had a negative effect on lower-income communities.

State Rep. Pierce said Indiana's property tax revision last year was regressive, burdening low-income people disproportionately. "We increased the sales tax (by 17 percent) because it's the least-hated of all taxes, but the truth of the matter is that it takes a larger chunk of poor people's money than it does to those better off," he said. "It's interesting to note that when you talk to poor people, they don't mind the sales tax because they feel that, because they're poor, they don't spend much money. They don't tend to realize that whatever they pay, it's a larger share of their total income than it is for a person with more money to spend."

Ultimately, the whole conversation may not matter this year. Although a state Senate committee passed a measure to amend the constitution to include property tax caps in an 8-4, party-line vote last week, and full Senate approval is expected this week, majority Democrats in the House are said to be unlikely to pass the measure in committee -- let alone let it get to the floor of the House.

"For Senate Republicans to push forward with this is just wasting taxpayer time and money. They know full well the speaker of the House said he was not going to consider the legislation this year," Simpson said.

"It's political theater at a time when we could better spend our time working on a budget, on the stimulus package, on unemployment insurance," she said. "Next year, when we have more data, we can take up the issue of a constitutional amendment. It's already the law, and I don't buy the argument that we have to talk about a constitutional amendment now. I tease some of my colleagues: 'What is it about this, about yourself, that you don't trust? There is absolutely no difference between passing this now, if that's what you want, or passing it next year, except next year, we will have newer and better information about what we did last year.'"

Koch, the Bedford Republican, said he's concerned that without a strong affirmation of the property tax cap system enacted last year, legislators could pick apart what he considers a well-conceived system. "I've described it as a Rubik's Cube," he said. "All the parts are dependent on one another. Remove one and the whole thing falls apart."

Lawmakers Will Get Jump On Short Session - Property Taxes Again Will Be A Key Issue For Legislators (Ind'pls Star, 11/18/09)
(This article was originally published in the Ind'pls Star November 18, 2009. Some bold type and highlighting have been added by the Webmaster.)

By Mary Beth Schneider and Bill Ruthhart
mary.beth.schneider@indystar.com

Property taxes once again will take center stage at the Statehouse -- and lawmakers aren't waiting until the session resumes in January.

With time short in the 2010 session, which begins Jan. 5 and must end by mid-March, legislative leaders plan hearings in December to address property taxes and a handful of other issues.

The announcement came Tuesday as legislators gathered for their annual one-day organizational meeting.

The debates next month in the House Ways and Means and the Senate Tax and Fiscal Policy committees will focus on seven bills. The top priority is a proposed constitutional amendment to cap property taxes at 1 percent of a home's assessed value, with rental and farm property capped at 2 percent and businesses at 3 percent.

But a new House bill also would limit how much the assessed value of a home or farm could rise.

House Speaker B. Patrick Bauer, D-South Bend, said Tuesday that House Bill 1004 is needed because the caps in the proposed constitutional amendment, which already are part of state law, haven't done enough to keep property tax bills down.

Bauer committed to hearings, but not a vote, on the constitutional amendment. He said that without controls on how fast the value of a home or farm can rise, Hoosiers don't have real property tax relief.

"Property taxes are going up," he said. "(Hoosiers) think they're capped, but they're not. And the biggest culprit is assessment increases."

Under House Bill 1004, a home's assessed value could climb only 1 percent annually, and a farm's value could rise only 2 percent, unless the property would have increased in value independently of the reassessment.

Senate President Pro Tempore David Long, R-Fort Wayne, said that while passing the constitutional amendment is a top priority, he shares Bauer's concerns about reassessments driving property tax bills up.

"I think it's a linchpin to property tax reform, and we have looked at it -- particularly with commercial properties but also residential -- to see if there is some artificial inflation of assessed value in order to maximize tax revenues," Long said. "While you can be for tax caps, you can also be for improving the assessing or tightening scrutiny, or whatever is going to require us to make sure that the long-term objective, fair assessing standards, are in place across the board."

In 2007, voters' anger over property tax bills helped force Indianapolis Mayor Bart Peterson from office. And next year is an election year, with all 100 seats in the House and half of the Senate's 50 seats on the ballot.

Lawmakers must take the final vote on the constitutional amendment to cap property taxes in order to let voters have the final say on the November 2010 ballot. Failure to act would mean the process for passing an amendment would start over, which would delay a vote by the public to 2014 or later.

Politics also might help drive some other issues that will receive early attention, although no hearing dates have been set.

The Senate Tax and Fiscal Policy Committee will debate Senate Bill 23, which would delay a business tax increase meant to plug the state's drained unemployment insurance fund.

House committees will take up three other bills. They include a package of ethics reforms to strengthen lobbying and fundraising rules; a bill that would kill the trouble-plagued privatization of Indiana's welfare delivery services; and a bill to require that at least 80 percent of workers on state capital improvement projects be Indiana residents.

A side benefit to the legislators' early start could be an early finish. Long, though, said legislators would need all the time they can get.

"Really, we have some pretty large issues to discuss, and I think we need to give it the time that's required to address it. I don't want to be on a rush just to get out by Valentine's Day or something like that," he said.

Taxes Field Of Nightmares For Hoosier Farmers? (IN Economic Digest, 11/26/09)
(This article by Annie Goeller was originally published in The Daily Journal of Johnson County, IN on November 25, 2009 and then republished in the Indiana Economic Digest on the same date.)

"Charles Stewart already was worried about making ends meet at his family farm, with falling crop prices and rising fuel costs; but over the past two years, another concern has crept up - his property tax bill...

Experts expect more increases to come that will hit farmers throughout the county and state because of a loss of tax credits for farmers, rising per-acre values and more relief to homeowners, pushing the burden onto other property owners...

In the past two years, farmers have been hit hard with increases as homeowners have gotten additional tax relief, and the state changed the way tax relief was given, eliminating certain credits farmers used to get.

Someone has to pay those taxes, and the burden has fallen primarily to farmers and businesses, (Larry) DeBoer said...

Now, a second punch will come from an increase in how much the state deems farmland is worth, which is expected to nearly double in a five-year period from 2007 to 2012, DeBoer said.

In 2007, the state said farmland was worth $880 per acre, an amount determined by a formula based on the rental price of farmland, crop prices and yield.

That formula calculates the rate based on six years of rent prices, crop prices and yield. And in 2007 and 2008, crop prices spiked. Those numbers will go into the per-acre rate starting in 2011.

And that's when bigger hikes are expected, with the per-acre rate expected to jump to $1,250 in 2010, from $1,200 this year, and to $1,400 in 2011 and $1,690 in 2012, DeBoer said...

They are focusing on two main issues that they plan to bring to legislators as soon as the 2010 session: redoing the calculation of how farmland is valued and stopping the 1, 2 and 3 percent caps on property taxes from becoming an amendment to the constitution...

But the group also takes issue with the additional property tax relief approved for homeowners, which added a 35 percent deduction to the value of homes and giving homeowners the lowest cap at 1 percent..." (more)

The Impact Of Property Tax Legislation On Indiana Households (IN Business Review, 11/28/09)
(This article by Larry DeBoer was originally published in the Spring 2008 Indiana Business Review. Bold type and highlighting have been added by the Webmaster.)

"Many Indiana homeowners saw big increases in their property taxes in 2007. In response, Governor Daniels and the Indiana General Assembly have proposed tax reforms that include large property tax reductions for homeowners. The proposals fund these reductions in part with an increase in the sales tax...(from 6 percent to 7 percent)...

HB1001 also includes a cap on homeowner tax bills equal to 1 percent of the gross assessed value of the home. The median homeowner does not qualify for this credit at the state average tax rate. This homeowner pays $910 in property taxes after the rate cut and added deduction, which is 0.8 percent of the $120,700 gross assessed value of the home...

...The upper income homeowner with a home valued at $225,000 just misses the credit. This household has a 1 percent cap at $2,250, and pays property tax of $2,246...

...at the state average tax rate, the minimum assessed value required to receive a circuit breaker credit is about $227,000. The ACS (U.S. Census Bureau) data imply that perhaps 14 percent of homeowners have home values that high or higher..." (more)

Property Tax Reform Results (Larry DeBoer, Ph.D., 12/3/09)
(The following article was first published by Purdue University on November 25, 2009. Bold type and highlighting have been added by the Webmaster.)

It's been 20 months since the Indiana General Assembly passed the big property tax reform, back in March 2008. Now, thanks to the Legislative Services Agency, we've got some numbers about how the reforms are working out. You can see the LSA's reports on 2009 property tax bills at http://www.in.gov/legislative/publications.

We had reports on homeowner tax bills in 2008. But that was a transition year, with tax relief provided by a temporary homestead credit. The big changes in property taxes took effect this year. The state took over the school general fund and county welfare funds, so they are no longer supported by property taxes. That cut property tax rates. Homeowners got a new 35 percent deduction, reducing the taxable value of their homes by more than one-third.

The reforms eliminated the property tax replacement credits. They substantially phased out homestead credits, too. And tax bills were limited by the circuit breaker property-tax caps.

Statewide, the average homeowner saw a tax cut of about one-third between 2007 and 2009. More than 95 percent of homeowners saw tax reductions.

Despite these big tax cuts, homeowners in about a third of the counties may be feeling grumpy. Their taxes went down in 2008 and are lower now than they were in 2007. But their tax bills went up from 2008 to 2009. In some counties, they went up a lot.

This is an illustration of the old saying, "no good deed goes unpunished." The governor and the legislature wanted to deliver tax relief to homeowners in a new way, by eliminating whole functions from the property tax. They couldn't do that for 2008, because the local budget year was already underway. So, they gave homeowners a temporary tax credit in 2008 and set the big changes for 2009.

Statewide, about the same amount of relief was provided in each year but with different formulas in 2008 and 2009. Homeowners in some counties fared better under the 2008 formula. When the 2009 formula kicked in, their taxes went up. If these homeowners are unhappy, it's because the legislature decided to provide tax relief in 2008, rather than waiting for 2009.

There may be some other grumpy taxpayers out there: owners of non-residential property. Taxes on commercial, industrial and agricultural land and buildings are up about 10 percent since 2007. That's mainly because the new 35 percent homestead deduction directed most of the added property tax relief to homeowners.

The circuit breaker tax caps went into effect in 2009. Homeowner tax bills were limited to 1.5 percent of assessed value before deductions. Farmland and rental housing was limited to 2.5 percent and all other property to 3.5 percent. Next year, those limits will be 1 percent, 2 percent and 3 percent, respectively. Taxpayers got circuit breaker credits to hold their bills to these caps.

Homeowners, farmland owners, and commercial and industrial business owners got little in credits in 2009. Homeowners got so much tax relief from their deductions that few had tax bills high enough to qualify for credits. Farmland is located in rural areas where tax rates are low, so most of it did not qualify either. Commercial and industrial businesses had a 3.5 percent cap, too high to limit tax bills in most places.

Owners of rental housing got more than 80 percent of the tax cap credits in 2009. That's because rental housing does not get the deductions that owner-occupied homes get, and because most rental housing is located in cities and towns, where tax rates are higher, and because it has a 2.5 percent cap, lower than other types of businesses. The credits are a reason why rental-housing owners saw tax decreases of about 10 percent from 2007 to 2009.

Of course, qualifying for a circuit breaker credit is a mixed bag. Taxpayers get relief--but only because their tax bills were so high in the first place.

Tax relief was just one part of the 2008 tax reforms. Reforms also centralized assessing with the counties. They introduced capital projects referenda to Indiana voters. They changed the source of funds for operating schools. They reduced revenues for many local governments. We've got a pretty good idea about how the reforms affected taxpayers, but there's still a lot to learn.

Panel Attendees Against Property Tax Caps (Rochester Sentinel, 12/4/09)
(The following article was first published by The Rochester Sentinel on December 4, 2009. Bold type and highlighting have been added by the Webmaster.)

None of the 35 people who attended a panel discussion Thursday about changing the Indiana Constitution to cap property taxes approve of the proposed caps.

All said they disapprove when asked by Aaron Smith, founder of Watchdog Indiana, at the end of the 75-minute-long meeting at Caston school cafeteria.

Identical joint resolutions to cap property taxes are pending at the Indiana Senate and House of Representatives. The proposed caps: 1 percent for homesteads - houses, garages and one acre of land; 2 percent for other residential property - long-term care facilities and apartment buildings - and agricultural land; 3 percent for commercial property.

Both the Senate and House have passed the resolution once. If both pass it again, Indiana's voters would vote on the caps Nov. 2, 2010.

Thursday's session was organized locally by Russ Phillips, a Caston School Board member. Smith moderated. Watchdog Indiana has 27,000 people on its e-mail list. Smith polls legislators each year and rates them as taxpayer friendly or not.

"Watchdog has determined tax caps will be good for the working folks of Indiana," Smith said.

Attendees disagreed. Of those who spoke, the main concerns were the varying percentage of caps, a desire to eliminate property taxes completely and the fact caps would not stop hikes in assessed valuation.

State Sen. Randy Head, R-Logansport, and state Rep. Doug Gutwein, R-Francesville, offered insight.

Some of the questions and their responses:

• "Why are homeowners not receiving constitutional protection before they even get to the 1 percent level?" Phillips asked.

Answered Head: "Under the old system, taxes could raise $400 or $500 or $5,000 or $10,000. Most of the time, especially with large issues, or contentious issues like this, you take what you can get one step at a time."

• Clee Alder, Kokomo, said he believes people need to realize their home and one acre have a 1 percent cap and the rest of their property a different cap.

Head said he'd support an amendment to change that.

• Dave Summers, Grass Creek, said agricultural land is being unfairly taxed with the current proposal and there's nothing stopping assessments from soaring to make up for lost revenue.

Gutwein said that has been recognized and House Speaker B. Patrick Bauer, D-South Bend, wants something done about it. Ideas about how to solve that, Gutwein said, are welcome.

• Tom Joyner, Logansport, said some want property taxes eliminated altogether.

Head said there's been some discussion about that but it's not likely any time soon. Those in the General Assembly in favor of an appeal are out-voted.