Editorial: Changes to property tax bill make legislation more balanced

IBJ was pleased to see this week that the Senate Tax and Fiscal Policy Committee stripped some language out of a property tax bill that we feared could be too detrimental to local governments.

The committee this week approved Senate Bill 1, sending it to the full Senate for consideration. As amended, the bill will put tighter restrictions on how much local governments can raise from property taxes and create a tax credit for first-time homebuyers. It also imposes new rules on school referendums.

But senators took out several provisions that Gov. Mike Braun had advocated for, including a 3% cap on the annual growth of individual property tax bills. Braun also sought to significantly increase the deduction available to homeowners, a move that could have dramatically reduced tax bills for some payers.

Senate fiscal leaders estimate the new proposal would save taxpayers $1.4 billion over the next three years, according to the Indiana Capital Chronicle.

Braun’s proposal would have saved them much more: $1.1 billion in its first year, rising to $1.6 billion by its third year.

Both plans reduce the revenue available to local governments, but Braun’s proposal could have been devastating for cities, towns, counties, libraries and schools.

Even with the changes, the bill could reduce revenue to local governments and schools by $300 million in the first year.

“We have worked extensively with the Governor’s Office to get this to a good spot,” said Tax and Fiscal Policy Chair Travis Holdman, R-Markle. “We just think there’s a fine line that we have to walk to make sure that we are careful to be responsible to the local units of government and at the same time provide some relief to taxpayers.”

Of course, not everyone is pleased. The Governor’s Office said the committee took “steps in the right direction” but that Braun would continue to work with lawmakers to “strengthen the amended bill.”

And local officials still have concerns, especially with the restrictions on property tax growth. The bill would mean, for example, that even if the assessed value in a community grows substantially—maybe because of new subdivisions or because of increased economic development, growth that can increase expenses—the government couldn’t collect more overall in property taxes.

Denny Costerison, speaking on behalf of the Indiana Association of School Business Officials, told the Indiana Capital Chronicle the amended bill lessened the negative impact on schools. But he said the tighter caps on property tax levies would still “significantly” reduce tax collections and therefore school budgets.

We are still concerned about those impacts. Local governments provide some of the most basic government services related to public safety, roads, public transportation and more. But we also recognize that the recent run-up in home prices has driven up tax bills for many across the state.

Senate fiscal leaders have taken steps toward a compromise. The House should refine further but always with an eye on striking a balance between taxpayers and government services.•

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