I assume the vote to carve the current property tax structure into the Constitution for future generations is a done deal, so I haven’t said much about it lately. I’m against it. We’re starting to see some problems with structured tax caps of 1% for residential property, 2% for non-residential rental property and agricultural property, and 3% for anything else – mostly business. But, good policy or bad policy, we’re looking to lock them in, removing flexibility for future generations when conditions change.
John Seidel of the Post-Tribune has a good article summarizing the current state of the tax cap situation. Abdul argues that because the General Assembly didn’t eliminate townships, future generations deserve to be hamstrung with respect to funding local government services. Or something.
Morton Marcus, meanwhile, argues against Constitutionalizing the tax caps. Rather than more government efficiency, the caps will likely result in deteriorating local services. The county option income tax the General Assembly provided as a replacement option isn’t all that great. Among other things, it allows only a tax on households and not business. This is just further degradation of local control; more and more local decisions have to run through Indianapolis. Marcus traces this back at least to 1973.
As far back as the property tax reforms of 1973, Indiana degraded local government and shifted power to state government. The legislature has increased its control of our schools. Cities and towns have become prisoners of the state in the tax wars. Libraries have been forced to defend their very existence.
Finally, the benefits of the caps are primarily enjoyed by owners of small rental housing units, commercial apartments and second homes (60%) with about 36% going to commercial and industrial properties. Only about 4% of existing cap benefits go to homeowners.
Marcus has the better argument, but Abdul’s side is going to win the day. Voters aren’t well informed about local government financing. They just hear “tax caps” and think, “yippee!”