Long-Term Property Tax Solution Is Not Yet in Sight
For release July 23 and thereafter (745 words)
by ANDREA NEAL
How do folks cope when their property tax bills rise by $100, $300 or $500 a month? Ed DeLaney, a Democratic candidate for state representative, wants to know. So he‘s distributed postcards to residents in District 86 and asked them for property tax data and stories. It’s been an eye-opening process that sheds light on the continuing property tax crisis in Indiana.
The replies reveal a pattern of belt tightening made more pronounced by high gas prices and falling stock values. Here are excerpts:
- “No travel for vacations, no new furniture for family room and a lot of worry.”
- “Reducing all around spending . . . don’t eat out . . . No more lawn service.”
- “My house will be for sale Sept. 1. I am now retired and property taxes account for over 25 percent of my income.”
- “I have to withdraw more than I hoped from my retirement IRA (Individual Retirement Account) at a time when the market is plummeting.”
- “We were working to pay off the house before our children started college. We night not be able to.”
- “Loss of trust in state and local government.”
The comments make this much clear: Property tax legislation passed during the 2008 session fell short of resolving all problems. Statewide, property taxes are supposed to go down about 31 percent this year, thanks to horse track licensing fees for slot machines and a 1-cent increase in the sales tax. In Vanderburgh County, one of about 25 counties to send out 2008 bills, residential taxes have dropped 49 percent.
But in other communities — Marion, St. Joseph, Delaware and Lake counties, for example where 2008 bills are yet to be finalized — property tax owners continue to get hammered. Especially hard hit are older, urban neighborhoods. These are considered historically undervalued so new assessment practices have caused dramatic jumps in tax bills.
In Marion County, where Gov. Mitch Daniels froze taxes last year pending a repeat reassessment to correct errors, the situation is especially confusing. Respondents to DeLaney’s survey reported having to come up with anywhere from $851 to $4,768 to pay “reconciliation bills,” the difference between the frozen amount and the final 2007 invoices. Even with modest rebates sent out this summer, it’s been too much for some people to handle.
As for the long term, DeLaney uses an analogy of a tarp in the wind that’s been tied down at one corner. The corner that’s been tied down is the 1 percent cap on property taxes which will take effect in 2010 assuming the legislature withstands special interest pressure to repeal it. (A constitutional amendment setting the cap in stone still must be approved by the next legislature and the voters).
The other three corners?
- Assessment itself. As the system is now, assessing home value is still very much a crapshoot. Property owners complain of wide variations in valuation between similar homes in similar neighborhoods. This has led hundreds of homeowner to appeal their assessed valuations in Marion County.
- The effect property tax caps will have on governmental budgets. Some school districts, counties and police departments say they’ll have a hard time making ends meet, despite reserve funds set up for schools and flexibility given counties to raise local option income taxes. For example, in St. Joseph County, financial analysts say the 1 percent cap will cost $3.3 million. Auditor Peter Mullen says the county will have to seriously consider layoffs. It’s almost impossible to get the LOIT raised in his county because two of three governing bodies have to agree on it.
- Disparities in taxable resources, especially once the 1 percent cap takes effect. In Center Township in Indianapolis, for example, close to half of all property is off the rolls because it is owned by federal or state government, universities, hospitals and charitable institutions.
The 2009 legislature must not only pass the constitutional amendment but address these three critical issues. But permanent solutions may come too late for some. As one couple wrote DeLaney, “We are in our 80s and on a fixed income so raising our house tax almost three times has taken away any free money we had for keeping our property up in repairs. Please, please lower our taxes.”
Their plea is a reminder to policymakers that the actions they take affect people in individual ways. A 31 percent tax reduction overall for Hoosiers is little consolation if you’re the exception in District 86 trying to come up with an extra $300 a month.
Andrea Neal is a teacher at St. Richard’s School in Indianapolis and adjunct scholar with the Indiana Policy Review Foundation. Contact her at email@example.com.