Seth Slabaugh, writing for the Muncie Star Press, has an article on the tax restructuring bill passed by the legislature earlier this year. In a bit of what appears to be editorializing, he describes it as the “landmark property-tax-reform bill.” Of course, “landmark” and “reform” are in the eye of the beholder. Landmark is probably less controversial than reform, I suppose. Whatever the legislature did, it was pretty big.
Everybody’s favorite economist ™, Larry DeBoer, points out that the legislation passed by state legislators gives a tax credit to taxpayers (the property tax circuit breaker) at the expense of local government without funding the credit.
What makes this different from every other credit offered by the state is this one is not going to be funded by the state,” said Larry DeBoer, an economist at Purdue University. “If your property tax bill comes in over the circuit breaker limit, you will get a credit for the difference, and that amount you will not pay to your local government, and your local government will have to do without. They will actually take the hit. They will suffer the revenue loss.”
Professor DeBoer also suggests that the legislation is complicated enough that not every County Auditor is going to be equipped to do the fiscal analysis required by the bill. It’s likely to be a major boon for fiscal consultants around the state.
In addition to the property tax circuit breaker, the legislation also raised the sales tax about 17%; shifted local responsibility for some school and welfare costs to the state; imposed restrictions on local government ability to engage in capital projects; imposes advisory duties on county councils with respect to non-school taxing units; and requires county assessors to absorb many of the duties of most elected township assessors.
With respect to the circuit breaker, Prof. DeBoer points out local units have even less control over their own destinies:
The tax rate that matters for the circuit breaker is the sum of all rates — libraries, towns, cities, counties — so no taxing unit has control over this,” DeBoer said. “If the sum of all the rates pushes the taxpayer above the credit limit, and the tax bill is not paid, the lost revenue is distributed among all taxing units in that area.”
So the new law makes all local budgets in a county interdependent.
“Everybody’s budget depends on everybody else’s budget,” DeBoer said. “That’s going to be a challenge. Certainly, this is going to have some complicated consequences.”