Wednesday, March 5, 2008


WE ARE THE TAXPAYERS of the State of Indiana. Our State’s Founders commenced our Indiana Constitution with this preamble:

WE, the People of the State of Indiana, grateful to ALMIGHTY GOD for the free exercise of the right to choose our own form of government, do ordain this Constitution.


1. Right Of Uniform And Equal Taxes
Our social contract with the governmental agencies of our State is simply that we consent to pay taxes from our assets and expect government at all levels, to uniformly and equally collect those taxes, and to expend our money for valid societal needs.

2. Right Of Property Ownership
As Americans and as Hoosiers we have the right to own and use real estate and to pass ownership on to our children.

3. Right to Continue To Own And Use Real Estate
We have the right to continue to own our real estate without the threat of sale and seizure of our real estate for failure to pay property taxes.

4. Right To Avoid Taxation On Unrealized "Gains"
We have the right to avoid the taxation of our real estate which values our real estate at more than we paid for it. Taxing our real estate at increasing "market value" levels inevitably has the effect of taxing "gains" that we have not realized, nor received, which no government should have the right so to do. The IRS only collects on real estate or stock gains that are actually received by taxpayers.

5. Right To Avoid Tax Sale Of Real Estate
It is a violation of our rights as owners of real estate to assess our real estate at "market value" levels, imposing higher taxes at each assessment cycle on "gains" we have not received, and then forcing the seizure and sale of our real estate at a tax sale. It is tyranny for our government so to do.

6. Right of Uniform And Equal Taxation
Our Indiana Constitution gives taxpayers the right to uniform and equal taxation. Our property tax system is neither uniform, nor equal. The assessment of the "market value" of real estate is a subjective procedure, ripe with inherent errors and abuses. If we want to buy more or earn more, we expect to pay higher sales or income taxes. Forcing higher and higher property taxes on the same unchanging asset is just wrong.

7. Right To Fight To Repeal Property Taxes
As taxpayers, voters and citizens, we have the right under the First Amendment of the United States Constitution (applied to the States by the 14th Amendment) to petition our government for redress of grievances. Thus, we have the right to fight to repeal property taxes. We have been doing so and we will, most assuredly, continue to do so until destructive and inequitable property taxes are a thing of the past.

8. Right Not To Be Lied To (Again)
We have a right as taxpayers to expect that when taxes are raised to replace property taxes that permanent reduction would actually occur, and that our property taxes would remain reduced. However, because we were lied to in ’72, ’82 and 2002, we don’t trust government, this time, to raise our sales tax (again) and lie to us about reducing our property taxes, again.

9. Right To See Through The 1% Of True Value Myth
We retain the right to see through the myth of the Governor’s proposed 1% cap on ‘true value’ proposal. The government would still have to (subjectively) decide the ‘true value’, and that ‘true value’ will still be an unrealized gain for almost all property taxpayers. We’re onto you.

10. Right To "Unelect" Opponents Of Repeal
We have the right to "unelect" those who seek to retain Indiana’s broken property tax system. We will run candidates for office who favor the freedom to own real estate without threat of government seizure. We will fight opponents of repeal in the May Primary Elections; we will fight them in the November General Elections; and will fight opponents of repeal in both major political parties. We will fight to win the battle for repeal, until the battle is won. This State, after all, belongs to its residents, not its politicians.


Indiana Property Tax Repeal Alliance

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669

Hoosiers For Fair Taxation, Senator Delph, Representative Noe, Representative Elrod and many other legislators along with Stop Indiana, attorney John Price, Eric Miller's Advance America, and the Statewide Taxpayer Alliance know that property tax abolishment, without substantial increases in sales tax and income tax, is realistic and possible. The economist Dr. Bill Styring's 2/2/2 Plan demonstrates that the state of Indiana can completely replace property tax without changing the state's current spending habits.

Dr. Styring's plan does not account for positive changes in Indiana's economy that will undoubtedly follow the elimination of property tax such as heavy real estate investment and increased consumer spending due to increased statewide disposable income. The real estate investment in Indiana alone would cause such an economic boom that it could likely end our abandoned property and foreclosure crisis. Property tax elimination would also likely cause a surge in Indiana's population as more people locate to Indiana to take advantage of real estate purchase opportunities without the burden of property tax. With the population surge would come more sales and income taxes.

The General Assembly does not have to adopt a specific plan until the year 2011. In the meantime, we recommend that the General Assembly approves the 27steps outlined in the report prepared by the Sheperd Kernan commission. While the Governor's commission cannot forecast the savings to the state once the plan is implemented, there is no doubt that the savings would be substantial--perhaps equivalent to the the entire property tax burden currently placed on Indiana's homeowners because our legislators have not had the political will to liberate Indiana's governing structure and her taxpayers from the 19th century.

Our citizen networks will work to replace all legislators who do not support property tax repeal in the November 2008 election.

The 2/2/2 Plan, to replace property taxes in Indiana based upon the latest revenue forecast (07/08 fiscal, estimate):

1) Current IN sales tax (state level rate of 6%): $5.601 billion2% increase would yield an additional $1.867 billion

2) Current corporate profits tax: ~$2 billion

2% increase would yield an additional $.286 billion ($286M)

3) A 2% statewide average of the COIT would yield $2.705 billion to cover local civil units of gov.

By adding these three together ($1.867 billion + $.286 billion + $2.705 billion), a total of $4.858 billion is realized; enough revenue to replace property taxes.

Indiana has a 70-plus year history of attempts to lower property taxes by raising other, non-property taxes. In every case these have failed miserably. The new taxes, or higher rates on old taxes, remain in place. And, in short order, property taxes rise back to their old levels, poised to roar even higher.

--1933. General Assembly imposes two new taxes: an individual gross income tax and a corporate gross income tax. The morgue of the Indianapolis Star indicates that the political leadership at the time said this was for property tax relief (1933 was the pits of the Great Depression, and people were losing their homes. Home prices declined by over 40% in the 1929-1933 period). Property tax relief was nonexistent. The state used the money to bail out the state's own finances.

--1963. General Assembly imposes a new sales tax at a rate of 2% and changes the 1933 individual gross income tax (from 1933) to an adjusted gross income tax (the one we have now) at a rate of 2%. Again, the ostensible reason was for property tax relief and again little PTR was forthcoming.

--1967. Those 1963 tax changes were raising more money than projected. The GA decides to give back 8% of sales and income tax revenue to local government for property tax relief. Local units spent the money. No PTR.

--1973. Gov. Otis Bowen launches the most determined PTR offensive yet. The sales tax goes to 4% and a new corporate supplemental net income (profits) tax is imposed. Strict property tax levy controls are imposed. It works... for a time. By 1980, property taxes adjusted for inflation are some 30% lower than in 1973. When Bowen leaves office the levy controls are relaxed. By the end of the decade, property taxes (adjusted for inflation) are back to 1973 levels. The doubling of the sales tax rate from 2% to 4% remains in place, along with the new corporate SNIT.

--2002. More fiddling with the sales tax in the hope of property tax relief. The results of this are obvious, or we wouldn't be debating the current property tax mess. All of this suggests that unless the property tax is totally ripped up by constitutional amendment, the assessment and collection mechanism dismantled, it will grow back. The PTR-inspired hikes in other taxes remain. That is our history. It is a terrible deal for taxpayers.

2. A vote in the 2008 legislative session for a constitutional amendment to repeal property taxes does not amend the constitution. It merely starts the amendment process. Amendments must be passed by two consecutively elected General Assemblies, then submitted to a referendum. Thus any amendment passed by the '08 Assembly must be passed by either the 2009 or 2010 legislatures, then submitted to the voters at the 2010 general election. The General Assembly does not need to decide on a "replacement revenue" package until the 2011 session.

3. What might such a "replacement revenue" package look like? The particular answer will come from the 2011 General Assembly and cannot be determined now (if for no other reason than forecasting state level taxes and property taxes out that far would be a most unreliable exercise. No one need be locked into any particular plan just yet. However, as an illustration that a replacement plan is feasible and less scary than many fear (we don't need to be talking about a 12% or 13% sales tax ... in fact, we should not be), consider just this one possibility.

Local sales taxes are generally very bad policy, for a whole host of reasons too numerous to mention in this short sketch. Sales and corporate taxes are best levied at the state level. It happens that roughly a 2% increase in the sales tax and a 2% increase in the corporate profits tax roughly take care of school propertytaxes. The loss of local control by the state assuming school property taxes is minimal. About the onlylocal control left is on building projects.

For local civil units, a statewide average increase in the individual adjusted gross income tax of about 2% suffices to replace local civil government property taxes, higher than 2% in some units, less than 2% in others.

Thus, a "2-2-2" plan~2% sales and 2% corporate profits at the state level for schools and a 2% average on personal income taxes for civil units—is about what would be needed. This is merely a ballpark projection to 2011.

There may be better plans, it's really a policy question for the General Assembly: do you want to make the trade of something like this in exchange for no-property-taxes-forever-on-anything? Everyone understands "zero."

4. Are there "practical problems? Of course. The two identified are how to make the civil government transition from a property tax base to an income tax base, and how to handle debt backed by property taxes. Without elaborating, the former can be handled using locator software (Map quest-type programs). The debt problem might be handled by treating the current state paid PTRC's as in lieu of property taxes (which they are) and paying PT-backed debt service from each unit's own PTRC.

Conclusion: Total elimination of the property tax via constitutional amendment is the only way to give property tax relief that will stick. The other tax action necessary to achieve this goal—in 2011-are large but not so scary as "a 13% sales tax." They are feasible. The question is for the General Assembly. Are we going to once again go down that 70-odd year path of failed PTR policies or are we going to rip the property tax up by the roots?

Posted by Hoosiers For Fair Taxation on Friday, January 4, 2008.