So, how much of the furor over increased property taxes I’ve seen in the Indiana blogosphere has to do with Marion County’s failure to plan ahead?
However, as Advance Indiana notes, among other things, Marion County apparently failed to pass a County Option Income Tax to offset the elimination of the inventory tax. That’s a pretty big deal, meaning that all of the revenue that used to come from inventory tax payers has now devolved onto other property tax payers in Marion County (and similarly situated counties). It makes me wonder how much of the pain in Marion County could have been avoided with some advance planning. It also makes me wonder how bad things are outside of Marion County. Unless this is a problem counties around Indiana generally have found themselves incapable of dealing with, I’d suggest that Indianapolis Mayor Peterson’s requests for a special session of the General Assembly be declined. That property taxes were going to increase substantially was no mystery during the regular session. The General Assembly took action, albeit well less than perfect action. Now, I figure they’re obligated to let the dust settle and revisit the issue next January.
Abdul says: “You know it would be nice if someone would put out a news release saying “we’re going to spend less money so Hoosiers can pay less in taxes!” That would be news.”
That’s easy to say. But, I’d like to first know how much spending has actually increased relative to inflation. My sense is that it’s not much of an increase. I’d also like to know which government services should no longer be provided.
The primary reasons for the high increases in property taxes recently are: 1) Elimination of the inventory tax – former inventory tax payers are paying less, so other property tax payers, including residential homeowners have to pay more. Counties were given the ability to implement a County Option Income Tax to offset the inventory tax reduction; basically you replace the revenue with income taxes instead of property taxes; 2) Reduction of the homestead credit and property tax relief credit – state subsidies that took the burden off of property taxes. These credits were provided out of a recognition that the state imposed large burdens on local taxes and also imposed significant restrictions on local taxing powers. These subsidies were reduced in an effort to balance the state budget and, effectively shifted the problem to local government and property tax payers; and 3) Changes in assessment rules – years ago, taxpayers brought a lawsuit arguing that the assessment rules unfairly and artificially underassessed some properties and overassessed others. The Supreme Court agreed and required something resembling market values be used for assessments. As a result the relative tax burdens shifted, with the underassessed property owners having to pay more and the overassessed paying less.
So, generally speaking, the dramatic rise we see in property taxes is less a matter of local government spending gone amok, and more a matter of shifting tax burdens. (You can expect those whose tax burdens went down to keep relatively quiet). Also, in some cases – such as, apparently, Marion County, this already difficult situation was made worse by failure to use available tools, such as the County Option Income Tax.
Bats Left Throws Right has a much more entertaining explanation of much the same thing.