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Vote ‘no' on tax caps

Public Question No. 1



by amending the Constitution of the State of Indiana to do the following:

(1) Limit a taxpayer's annual property tax bill to the following percentages of gross assessed value: (A) 1% for an owner-occupied primary residence (homestead); (B) 2% for residential property, other than an owner-occupied primary residence, including apartments; (C) 2% for agricultural land; (D) 3% for other real property; and (E) 3% for personal property.

The above percentages exclude any property taxes imposed after being approved by the voters in a referendum. (2) Specify that the General Assembly may grant a property tax exemption in the form of a deduction or credit and exempt a mobile home used as a primary residence to the same extent as real property?


Voters will make their most important mark on the state's future not in choosing among candidates on the Nov. 2 ballot, but in weighing the wisdom of amending the constitution of the State of Indiana to write in arbitrary limits on property taxes.

The question comes near the end of most ballots, past the high-profile contests, township races and judge-retention questions. The measure has lasting implications, worthy of more than the sound-bite benefits proponents offer. Lawmakers want voters to excuse retroactively the unconstitutional tax policy they adopted and give them legal and political cover for policy that, long term, will leave citizens and the public officials they elect frustrated and boxed in.

Indiana's founders prescribed a "uniform and equal rate of property assessment and taxation" when they adopted the state constitution in 1851. The General Assembly ignored them in adopting random limits on tax rates for different types of property. Lawsuits threatened by business owners facing the higher limits provide the real reason legislators are amending the constitution instead of fixing the system.

In 1988, Hoosiers faced another constitutional question – whether Indiana should repeal its 157-year ban on gambling to allow a state lottery. Voters supported repeal by a wide margin, opening the door not just to the lottery, but to horse-track betting, riverboat gambling, video gambling and racinos – far more than promised. The tax-cap amendment also will carry unforeseen consequences. Almost certainly, one will be that many will not get tax relief.


The constitutional language calls for limits on annual property tax bills to the following percentages: 1 percent of total assessed value for owner-occupied homes, 2 percent for farmland and other homes, including rental property, and 3 percent for all other property, including businesses.

In effect, the owner of a $100,000 home would supposedly never pay more than $1,000 in property taxes and the owner of a business assessed at $300,000 would never pay more than $9,000.

The percentages are not derived from careful economic analysis, but instead represent arbitrary figures that voters could easily grasp. In approving the amendment, Hoosiers will overturn the founders' intent and forever grant constitutional protection to unequal taxation.

No lawmaker would ever propose a repeal of the tax-cap limits, even if those limits are disingenuous.


And the suggestion that tax caps will truly limit taxes is disingenuous. The amendment serves explicitly to exclude any property taxes imposed after being approved by the voters in a referendum. A voter-approved measure to raise additional operating money for a school district or to build a library would fall outside the tax-cap limits. Increases in assessed property value also will push tax bills higher. Homeowners who have reached the 1 percent cap and add to their homes, for example, will find their bills increase along with their assessed property value.


Lawmakers also have preserved in the language the right to grant a property tax exemption in the form of a deduction or credit and exempt certain types of property. This gives them wide latitude in altering tax bills and, in effect, shifting tax burdens so property owners who haven't reached the cap see hikes.

Moreover, the big beneficiaries are not individual homeowners. Statewide, using the amount "saved" by the tax caps as a measure, it was owners of rental properties and apartments – those for whom the 2 percent cap applied – who got the most credits: more than $169 million this year, compared with the $90 million in credits to homeowners. There are other disparities: Owners of costlier homes in high tax-rate jurisdictions receive the most benefit. In Fort Wayne, the average credit for homes assessed at more than $300,000 was $1,780, while the average credit for homes worth less than $200,000 was $224.

Ironically, those who benefit the least from tax-cap credits will suffer the most from tax-cap losses. Lower-income households are more likely to depend on public transportation, library services and school programs supported by property taxes. Reductions have already been made in many of those services, and continuing revenue losses will inevitably result in new or increased user fees, including bus fares and school extracurricular costs.

Tax-cap limits already are in effect. The push to write them in the constitution comes from the realization that, long term, Hoosiers won't like the effects.

But even if they demand repeal, it will require the approval of legislators in two separately elected sessions and another statewide vote – most likely another five years. In the meantime, the quality of Indiana schools, libraries and parks may well decline or require increases in other taxes and fees to preserve. Services that residents have come to expect and depend upon could well diminish.

The effects of the law demand more scrutiny than they have so far been allowed. The answer to Public Question No. 1 should be "no."