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INDIANAPOLIS – If the state of Indiana stopped giving property-tax relief and took over the rest of the school general fund and all welfare levies, most homeowners would pay about the same in property taxes, but businesses would see substantial savings.
Senate Republican fiscal analyst Dan Novreske outlined one proposal to members of the Commission on State Tax and Financing Policy on Monday but stressed it was not a recommendation.
The plan would take the $2 billion a year the state pays in property-tax relief credits and homestead credits and use the money to take over the remaining portion of the school general fund and various welfare levies.
The exchange is not dollar-for-dollar, though, and state lawmakers would have to find an additional $471 million to make the initial swap, as well as ongoing money every year for growth in those programs.
Currently, the state pays for 85 percent of the school general fund while the entire cost of the welfare levies is paid for with property taxes. Eliminating these property-tax levies means they can never grow in the future.
Legislators on the panel did not seem enthused about the prospect, though.
Sen. Lindel Hume, D-Princeton, pointed out that the state would just be moving existing tax-relief money from one mechanism to another and there would be no new property-tax reduction.
According to Novreske’s rough estimates, Hoosiers living in their primary home – called homesteads – would see no drop in their property-tax burden.
Other residential property taxpayers would see a 3 percent decrease, and businesses would see a 12 percent drop.
The reason for the difference between the taxpayer groups is that most homeowners would no longer get the benefit of the homestead credit on their bills – something businesses never got in the first place.
And Sen. Robert Meeks, R-LaGrange, pointed out that property-tax bills will still rise because the proposal makes no changes to the local spending authority of townships, cities, towns, libraries or capital expenditures for schools.
Kenley also on Monday put to rest any rumors that legislators would attempt substantive property tax changes on Organization Day in November. That is the ceremonial first gathering of the General Assembly to swear in new members.
Gov. Mitch Daniels has asked them to ratify some small changes he has made unilaterally this summer, such as extending several deadlines.
And Kenley said not to expect anything else.
“These issues are so large and they deserve full public hearings,” he said. “The real heavy lifting will come after Org Day.”
The next commission meeting is scheduled for Oct. 15 and will cover issues such as debt issuance, circuit-breaker proposals, and exemptions for seniors and those with disabilities.
The group hopes to have recommendations for major property-tax overhaul by the end of the year so lawmakers can tackle the issue when the session begins in January.
nkelly@jg.net
