Lend us Your Ear on Property Taxes

December 4, 2005

Andrea Neal column for Nov. 9 and thereafter
730 words

INDIANAPOLIS — Gov.-Elect Mitch Daniels is taking a victory lap around the state to thank voters for their support. Before he puts RV1 to pasture, I hope he’ll come to my neighborhood on Indy’s north side. We were among those hard hit by property tax reassessment and my neighbors and I want to make sure he understands our plight before Inauguration Day.

If he comes to Arden, he’ll notice one thing right away: "For Sale" signs. In the old days, properties sold like – pardon the cliché – hotcakes. When I was house shopping, my Realtor said, "If you see something you want, you’ll have to make an offer on the same day it’s listed."

Not anymore. One house around the corner has been for sale for more than a year. I counted three open houses Sunday and 14 For Sale signs.

It’s the Law of Unintended Consequences.

When a court struck down Indiana’s property tax system as unconstitutional, it set off a chain of events that helped some neighborhoods but hurt mine. The court ruled that Indiana’s tax system was arbitrary and unfair due to huge differences in taxes paid on properties of similar value. The state switched to a more market-based system in 2003 in an attempt to set things right. But for many homeowners in urban areas, tax bills doubled, tripled, even quadrupled.

You don’t have to be a brain surgeon to understand what happened. When you try to equalize property tax bills by suddenly increasing assessed value in neighborhoods that have been historically under assessed, people won’t be able to pay them.

A friend who lives around the corner saw her bill go from about $2,400 to $5,000. You can bet her salary at work didn’t double last year.

For the retirees, it’s even worse. Their Social Security payments didn’t miraculously go up $300 to $400 a month to cover higher tax bills.

So, yes, people are leaving. One of the prettiest homes in the neighborhood is for sale because the family is moving to Carmel. They can get more house for the money, pay less in taxes and live in a better school system than Indianapolis can offer.

It’s a downhill spiral. If the tax situation doesn’t get fixed, more families will flee and home values fall, which will mean less taxes for schools and other services.

So there’s one other stop Daniels needs to make before he ends his Victory Tour, and that’s to the home of losing legislative candidate Mort Large in House District 86.

Large, a Republican, didn’t stand much of a chance against David Orentlicher in this Democratic-majority district. But of all the candidates on the ballot this year, his property tax plan was the most thoughtfully crafted.

Large wanted to replace the current system with an "acquisition value" formula while providing protection for taxpayers from future increases. Under his proposal, property values would be those determined by the 2002 assessment. Going forward, homes would be assessed based on sales price with annual adjustments at the rate of inflation or 2 percent, whichever is lower.

Large would cap the total tax on any property from all taxing authorities at 1 percent of taxable value. A house bought in 2004 for $130,000 would have maximum property taxes of $1,300. If the owner still lived there in 2009, the maximum tax would be $1,435, after taking into account the home’s appreciation.

Finally, Large would require any tax rate increase passed by non-elected taxing authorities be approved by a simple majority of the most appropriate legislative body. In Indianapolis, for example, if the library board decided to raise its tax rate, that increase would only become law if a majority of the Indianapolis City-County Council voted in favor of it. Tea parties have been fought over less than this.

On the same day they elected Daniels, Hoosier voters approved a change in the Indiana Constitution that will give lawmakers greater flexibility to rewrite property tax laws. The amendment removed the requirement that homes, land, buildings, equipment and inventories be taxed on a "uniform and equal" basis.

The amendment itself changes nothing, but will ignite a torrent of property tax reform bills in the 2005 legislative session. That’s why RV1 needs to come to my neighborhood and my House District. Come see what reassessment wrought. Homeowners can’t afford any more laws of unintended consequences.

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