At long last, Gov. Daniels has announced a tax plan. According to his announcement, property taxes on residential homeowners would be limited to 1% of the home’s assessed value and would receive an increased homestead exemption. Taxes on residential rental properties would be capped at 2% and at 3% for business properties. Gov. Daniels would also like to raise the sales tax 1% to pay for these caps and dedicate certain gambling revenues to property tax subsidies.
Furthermore, property tax replacement credits to local government would be eliminated, but the state would assume school operating and transportation costs. Local governments would still be required to pay for the physical school structures and, under the Daniels Plan, more red tape would be placed on taxing decisions by local government.
I don’t have any strong reaction to the plan, probably because I don’t understand it well enough. A lot of it looks like legislation Sen. Kenley was looking for last year, so it’s probably not all bad. For my part, I’m not so much leery of Republicans trying to screw Democratic constituencies on this one; but I am worried about the State looking to solve its problems by screwing local government (see, e.g. the “balanced” 2005 state budget).
The Indiana Chamber of Commerce seems to be awfully cautious about the Daniels Plan at this point. And, that stands to reason. A significant part of the recent increase in property taxes for residential homeowners comes from shifting the burden away from business property over the past decade.
Ruth Holladay has commentary on the Daniels Plan. I have to disagree with her when she says, “But Daniels, like him or detest him, seems ahead of the game.” It took him 3 years to do squat about the property tax issue. Calling that “ahead of the game” is ridiculous.