REFORM CALLED VICTORY FOR HOOSIER TAXPAYERS
Today is an historic day for Indiana. At 1:00 p.m. this afternoon in the Statehouse rotunda, Governor Daniels, House Speaker Pat Bauer, Senate President Pro Tempore David Long and I signed HB 1001, the property tax relief bill, into law.
You will find details of the plan below. This plan will usher in a new era of taxpayer protection in Indiana thanks to some great cooperation and compromise in the Statehouse.
Taxpayers will no longer be asked to open their pocketbooks to pay for government's overspending. Instead, government will have to operate within its budget and learn to maximize every taxpayer dollar.
I am proud to have the opportunity to stand among the Hoosier lawmakers who worked with us to pass meaningful property tax relief. We will be kicking off a new era in Indiana-one that puts Hoosier homeowners first.
LT. GOVERNOR BECKY SKILLMAN
Wednesday, March 19, 2008
Key elements of HEA 1001
The plan adopted by the General Assembly meets all four of the key elements laid out by Governor Daniels as essential to providing meaningful and lasting property tax reform in Indiana.
**Homeowners will see an average tax cut of more than 30 percent in 2008 vs. 2007 bills
**2008 homeowner relief increased by $620 million - the total expected collection from the
sales tax increase - bring the 2008 total homeowner relief to $870 million
**The plan caps homeowner property taxes at 1 percent of a home's assessed value starting in2010. (In 2009, the cap will be 1.5 percent)
**The plan caps property taxes for apartments and agricultural land at 2 percent of assessed value in 2010 (In 2009, the caps will be 2.5 percent)
**The plan caps business property taxes at 3 percent of assessed value in 2010 (In 2009, the cap will be 3.5 percent)
**When caps are fully in place, the plan delivers $1.72 in tax cuts for each $1 of new sales tax.
**This plan takes the first step toward placing the caps in the Indiana Constitution. Taxpayers will get a chance to approve the caps in the November, 2010 general election only if lawmakers approve them again next year.
**The plan caps homeowner property taxes at 1 percent of a home's assessed value starting in 2010. In 2009, the cap will be 1.5 percent.
**State takes over about $3 billion of costs that were previously on local property tax rolls:
**The remaining 15 percent of school operating costs
**Child welfare levies
**Costs of juvenile incarceration in state facilities
**State fair and forestry levies
**Health care for the indigent
**Pre-school special education levies
**Costs of police and fire pensions pre-1977
Limits on Local Government Spending
**Referenda required for new school and local government capital projects.
**For elementary and middle school projects over $10 million
**For high school projects over $20 million
**For local government projects over $12 million or 1 percent of assessed value
**Eliminates loopholes on levy appeals that previously enabled local governments to
spend more than budgeted
**County Council oversight of non-elected board budgets
Improved Accuracy and Fairness in Assessment of Property Value
**Reduces the total number of assessors from 1,100 to 92 county assessors and 42 township assessors, an 88 percent reduction.
**Requires referendums this November in townships with more than 15,000 parcels to determine if township assessor duties should be transferred to the county
**Increased requirements for assessor certification that will mean more equity, uniformity and fairness
**A process in place to remove an assessor who does not meet performance expectations.
**Stronger state oversight with the Department of Local Government Finance required to be party to any vendor contract
Other Elements of HEA 1001
**Provides transition period to ease the impact of the property tax caps on local government
**Provides special accommodations for Lake and St. Joseph counties, due to their high property tax rates and heavy reliance on property taxes to fund local government services
**Provides $120 million for schools in 2009 and 2010 to reduce the impact of the tax caps
**Increases school "rainy day" fund to ensure adequate funding is available in the event of an economic downturn
**Limits property tax bill increases to no more than 2 percent annually for seniors who make less than $30,000 annually (single) or less than $40,000 (joint), if the assessed value of their homes is $160,000 or less.
**Increases renters deduction from $2,500 to $3,000.
**Increases earned income tax credit for lower-income Hoosiers from 6 percent to 9 percent.
Thursday, March 20, 2008
REFORM CALLED VICTORY FOR HOOSIER TAXPAYERS
Posted by Team Hammond at Thursday, March 20, 2008
Blunt Proof of the Feasibility to Permanently Abolish Property Tax
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669
BLUNT PROOF OF THE FEASIBILITY TO PERMANENTLY ABOLISH PROPERTY TAX.
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.
PROPERTY TAX HISTORY PREPARED BY DR. BILL STYRING
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.