If angry taxpayers are unlikely to see Indiana’s property tax system repealed, they are at least likely to end up with greater control over it in terms of approving or rejecting building projects at the ballot box. But lawmakers establishing a referendum process need to be aware that the mix of fixes they are weighing could turn a referendum into a dangerous tax-shift tool.

The consequences of replacing Indiana’s current remonstrance-petition process with a direct voter referendum are drawing well-deserved scrutiny in the General Assembly. Legislators must continue to view any change in terms of all other steps taken, not on the pros and cons of a referendum alone.

Indiana is among only a handful of states that does not give property owners the right to approve or reject bond issues in a voter referendum. The state’s unique remonstrance-petition process instead makes project opponents and supporters compete for signatures.

But it’s also true that Indiana has adopted a unique circuit-breaker feature that caps taxes at a percentage of a property’s assessed value. The full effect of the circuit-breaker won’t be felt until 2010, but the tax-cap idea has proved so popular that Gov. Mitch Daniels has expanded it in his tax proposal, limiting tax bills on owner-occupied homes to 1 percent of the property’s assessed value, other residential property to 2 percent and business and farm property to 3 percent.

The states that currently hold voter referendums don’t cap tax bills, so voters who support a bond issue understand they are approving a tax increase. A referendum process combined with a circuit-breaker is a different animal. A homeowner who has reached the 1 percent limit on his tax bill might vote in support of one of those “Taj Mahal” school buildings decried by lawmakers, only to shift the cost for it to a business owner or farmer whose tax bill is short of its 3 percent cap. That’s hardly the fair system elected officials claim to seek.

Tinkering with the proposal is already under way. In the Senate, where Sen. Gary Dillon, R-Columbia City, authored the bill that includes the referendum mechanism, an amendment was approved to exempt school districts with enrollments growing faster than 4 percent a year, allowing them to seek approval only from their county council. Sen. Connie Sipes, D-Albany, voted against the amendment, rightly noting that in many cases the fast-growing districts are responsible for the ballooning school debt.

It also creates an unfair advantage for those districts over rural and urban schools, which might not have the enrollment challenges, but instead face the challenge of aging, inefficient buildings.

The Indiana House voted along partisan lines this week to exempt school projects, with the exception of recreational facilities like stadiums and swimming pools. The Democratic-controlled House will likely have to offer more of a compromise before the session’s end – approval of the referendum process appears inevitable in this election year, and exempting school projects while including libraries and municipal buildings makes little sense.

In the House debate, Rep. Jeff Espich, a Uniondale Republican whose district includes part of Allen County, chided Democratic lawmakers for suggesting that voters shouldn’t be allowed to determine the fate of capital projects.

“Do you think the people we serve are stupid or dumb?” he asked.

Espich is a smart lawmaker and he knows the issue is more complex than that. But it’s smart politics to paint the opposition as hostile to public input.

Tax policy is a delicate balance of interests. As lawmakers strive for a better balance and more voter input, they must be aware of all possible repercussions.