By Sen. Dennis Kruse
STATEHOUSE - Indiana was just a youngster and America had yet to celebrate its centennial when Hoosiers first began paying property taxes. Today, as the state nears its bicentennial in 2016, the basic property tax system remains much the same. Change was long overdue.
What happened with property taxes in the recent legislative session was not all I had hoped for, but it was a good start down a new path. I wanted to dedicate the next two “Kruse Reports” to this topic, and explain clearly the coming changes in this much-debated issue.
I was among proponents of property tax reform who stressed the need to modernize our antiquated system. Taxing citizens based on property ownership dates back to the 1800s when Hoosiers generated income from crops and livestock. Today, most parcels are residential, often owned by senior citizens on fixed incomes who can lose their homes – its entire value and likely their largest asset – if they fall behind on property taxes.
This year’s House Enrolled Act 1001 adds $300 million for additional homestead credits to be given yet this year and another $250 million for immediate protection from property tax increases in 2008. Without this year’s relief, property taxes on the average Indiana homestead were expected to climb 23.8 percent. With this relief, owners of the same homestead will face an average increase of 7.7 percent – reducing the impending increase by more than two-thirds. Lawmakers agreed this immediate relief would be sent directly to homeowners.
For the average Hoosier homeowner, this relief would amount to $554 for tax years 2007 and 2008. These estimates do not include additional property tax savings that may be realized if counties adopt any of the Local Option Income Taxes (LOIT) in House Enrolled Act 1478.
As important as those dollars, in my view, is the potential for more change. House Enrolled Act 1478 gives local governments important new tools enabling them to shift from outdated, unfair taxes on property to Local Option Income Taxes (LOITs).
There are three different kinds of LOITs for communities to use:
- one for tax dollars (levy) growth;
- another for property tax relief; and
- a third for public safety costs that may only be used by counties adopting the first two LOITs.
These LOITs are personal income taxes which businesses do not pay. Instead, businesses would submit their fair share of property taxes by paying up to three percent of assessed valuation on real property.
All of the above would help replace Indiana’s antiquated system of property taxes with a more modern, fairer way to raise needed revenue based on actual personal income and the ability to pay. Next week, we’ll examine how a new local review board can help keep your property taxes down as well.
Please contact me at State Senator Dennis Kruse, Indiana Senate, 200 W. Washington Street, Indianapolis, IN 46204 or call 1-800-382-9467, or send e-mail to S14@in.gov.
