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INDIANAPOLIS – As many as half of Indiana’s homeowners would not see state property tax relief under a proposal offered by Gov. Mitch Daniels’ administration Monday during a state finance panel.
The General Assembly approved $300 million in relief earlier this year to be doled out at the end of the year or early 2008 to all Hoosiers living in owner-occupied homesteads through a rebate or refund.
The money was meant to mitigate the projected 24 percent increase statewide in residential property tax bills.
But Ryan Kitchell – head of the Indiana Office of Management and Budget – said Daniels prefers a circuit-breaker approach for the $300 million in relief.
Under the existing plan, the $300 million would be broken down, with each county being given a pot of money according to a complex formula created by the General Assembly.
That part would stay the same. But Daniels would then use the money to reduce bills for people whose tax bills are a higher percentage of their assessed value than others.
For example, a preliminary analysis in Huntington County shows the circuit-breaker rate would be between 1 percent and 1.25 percent of assessed value.
So anyone with a $100,000 home whose property tax bill is above $1,000 would get relief under a 1 percent circuit breaker. Anyone whose bill is below that amount would not.
Other proposed circuit-breaker rates in northeast Indiana would be between 0.50 percent and 0.75 percent for LaGrange, Wabash and Wells counties or between 0.76 percent and 1 percent for Adams, Whitley and Kosciusko counties.
State officials didn’t have enough data for Allen, Noble, DeKalb and Steuben counties to estimate a circuit-breaker rate, which varies per county because average tax bills vary.
“Our philosophy is to get immediate relief to those who need it the most,” Kitchell said. “This does it.”
Sen. Robert Meeks, R-LaGrange, said the basic philosophy to be debated is whether the relief dollars go to every homestead – including those with decreases – or just those hardest hit.
House Ways and Means Chairman Bill Crawford, D-Indianapolis, said targeting the relief would be a major shift in policy for the legislature, which has historically spread the money over the entire homestead base.
“We are changing the rules of the game midstream for some taxpayers,” he said.
Kitchell said Daniels wants to use this circuit-breaker approach via a credit on homeowners’ fall tax bills instead of a rebate. But that would take legislative action.
Sen. Luke Kenley, R-Noblesville – head of the Commission on State Tax and Financing Policy – suggested Monday, though, that the governor has the ability to apply the circuit-breaker approach to the rebate without legislative approval.
“It might create a political war,” he said, noting Daniels is seeking input on the option, as well as a possible consensus.
Kitchell said he would have to research Kenley’s suggestion, and noted this is not the direction the governor is seeking at this time.
“When the legislature enacted the rebate check, the intent of legislature was fairly clear. I’m not sure I like the idea the governor can come along and Monday morning quarterback and decide to reinterpret what the legislature passed,” said Sen. Lindel Hume, D-Princeton. “A circuit breaker might be a better method to help people who are in more trouble. But I don’t like the idea that he can change the intent of the legislature.”
Monday’s hearing went for almost seven hours, including several hours of testimony on assessing practices.
The next meeting will be Aug. 13 with more information to follow on the subject. The commission can only make recommendations for the legislature to act upon in the next session.
nkelly@jg.net
