2008 Legislature

Bottorff said local officials are well aware that Indianapolis Mayor Bart Peterson was voted out of office last week in part because he pushed to raise local income taxes.

This new plan, which the state Tax and Financing Policy Commission voted 5-0 to recommend to the legislature, would cut homeowners’ property tax bills in half — and rental property and second homes by about 25 percent — beginning with the property tax bills due in 2008.

Under the plan, counties would be either mandated or given incentives to increase their local option income taxes by, in most cases, between 0.6 and 0.7.percentage points.

In Marion County, the county’s income tax — currently 1.65 percent — likely would need to be raised by 0.8 to 0.9 percentage points in order to provide the 50-percent cut in property taxes.

And to raise the $771 million needed to pay for the state assuming the cost of child welfare and schools’ general funds, the commission recommended raising the state sales tax by less than a penny and/or expanding it to services not covered by the tax.

Sen. Luke Kenley, the Noblesville Republican who is chairman of the commission, called the recommendations “a road map for the General Assembly.”

The commission said property taxes pay for local services and that local governments should take some of the responsibility for those expenses by raising income taxes.

The commission’s proposal goes further than a plan unveiled by Gov. Mitch Daniels in October. He called for cutting homeowners’ property taxes by a third, paid for by a 1-percentage point increase in Indiana’s 6 percent sales tax.

Other key differences: Daniels’ plan called for the elimination of all township and county assessors and for voters to approve of major building projects in a referendum; the commission called for retaining one elected county assessor who must meet minimum educational standards, and for no referendums.

Daniels praised the commission plan in a statement released by his office.
“It closely parallels my tax relief plan and supports all of its key principles,” he said.
Daniels’ plan and the commission’s plan call for the state constitution to be amended to cap property taxes to keep them from rising again in the future.

Daniels was specific, calling for homeowners’ bills to be no more than 1 percent of their homes’ assessed valuation, with rental property at 2 percent and businesses at 3 percent. The commission was deliberately vague, saying that will need to be hammered out by the legislature.

“Some people privately were not sure it’s a good idea to put (caps) into the constitution,” Kenley said.

Pat Kiely, president of the Indiana Manufacturers Association, said the commission’s plan “has some pretty big unanswered questions.”

Business, though, also has concerns about Daniels’ proposal, particularly because business’s property taxes are capped at a higher level than homeowners’.

The commission started meeting on a tax plan after a state-ordered reassessment led to higher property tax bills across the state. It heard 35 hours of public testimony over eight meetings.

The proposal, said state Rep. Peggy Welch, D-Bloomington, showed: “We did hear. We did listen.”