Improve Property Taxes

To anyone who wants to be part of working on a law to improve property taxes, come to Ed Angleton and Jenny Elkins' house, 1215 Polk Street, this coming Wednesday, 8/20, at 6:30 pm.

Below is a list of ideas that the legislative group has come up with to date. Now it's time to refine and prioritize list and come up with a blueprint on how to get it sponsored and enacted.

1. CUT GOV'T SPENDING. Judge Randall Shepherd and former Gov. Kernan came up with a plan to streamline gov't that included getting rid of some township offices. What has happened with that plan? I know getting rid of township assessors is coming up for a vote, but what about the rest of it?

2. In some states, property taxes are also based on Market Value, but increased at a gradual rate each year to bring it up to the actual market value. (example state of Massachusetts) www.zillow.com. In CALIFORNIA, property owners pay property tax based on what property assessed for when acquired. It can only go up a minimal amount per year after that (1 or 2%). When property is sold, assessment reverts to current value. (There was some discussion of people holding on to properties (older folks who should and would want to move to a condo will hold on to the big house because of costs), not moving, stagnant home market, Could be hard for the next generation to own a affordable home in a good area (low inventory). (Daniel real familar with this topic)

3. One tax rate throughout the state instead of by taxing district

4. More exemptions on primary residence (only)

5. Base taxes on square footage, lot size etc. - must be easy to calculate by owners.

6. Commuter tax- research why the County Option (local) income tax was done away with. People who live in surrounding counties and work in Marion county would pay a percentage through county tax to Marion and a percentage to the county they live in.

7. No one loses their home due to not being able to pay property tax. Garnish wages, garnish state income tax refund etc.

8. Tax State owned properties such as State owned parking garages, office buildings and parks, or adjust tax rate in district to reflect the percentage of non-taxable entities

9. Reduce or eliminate offering tax abatements on buildings.

10. Base taxes on ability to pay. (means testing, state income tax returns....)

11. Eliminate property tax altogether, and instead revamp state income tax. Do away with straight tax which is too burdensome to low income people, and go to a staggered rate where those with higher income pay a progressively higher percentage of income tax. This would decrease administrative costs, and simplify system.

12. Provide a safety net for those who cannot afford higher tax bill, such as some kind of hearing process where they can present their case for why it would be unreasonable to require them to pay the higher taxes, such as limited income, or make that a legitimate reason in current appeal process.

13. In addition to protecting people going forward, include legislation that would provide retroactive solution, such as safety net that would limit percentage of someone's income that could go towards property tax with compensation owed for those taxes paid in last bill, or that would offer some venue for tax payer to challenge based on income and inability to pay.

14. Once we have nailed down our priorities, can bring in other groups with competing interests to negotiate buy-in and gain credibility with legislators. This could include MIBOR (Realtors), CIREIA (Investors and Landlords), Marion County Treasurer, Marion County Assessor, Ind. Dept. of Revenue, other state and county depts. dealing with budget, neighborhood organizations such as Meridian Kessler, Butler Tarkington, Holy Cross, Woodruff, Cottage Home, and other neighborhood orgs. around the state that have been hard hit, Libertarians, other tax protest organizations.

15. Finally, here is an expanded excerpt of recommendations by a 1/2008 report of The Indiana Association for Community Economic Development (IACED):

Property taxes are often too high and problematic for those with low-incomes, reduced income due to unemployment, and those with fixed incomes, especially in areas where property values and taxes are rising rapidly. Research shows families below the poverty level typically spend 42 percent of their income on housing compared to the national median of 22 percent (U.S. Department of Housing and Urban Development). This also translates into property taxes. According to a study by the Institute on Taxation and Economic Policy, in 2002, low-income families paid an average of 3.0 percent of their income in property taxes while middle income families paid 2.4 percent, and the high income taxpayers paid only 0.8 percent. Property tax relief can be targeted at specific populations and help those, especially in areas where there has been a lot of unemployment, by utilizing traditional circuit breakers funded with state revenues rather than the homestead credit and mortgage deduction options currently implemented in Indiana.

Circuit breakers are property tax refunds paid for by state government to residents whose tax liability is considered too high and/or the payment amount represents a large portion of the family’s income. The concept of circuit breakers are founded within the philosophical belief that fair taxation should be linked to a taxpayer’s ability to pay. Traditional property taxation tends to be based on the philosophy that taxes should reflect the market-value, regardless of a single-family homeowner’s ability to pay. Indiana has a 2 percent circuit breaker in the state constitution. However, when you look at the traditional definition of a circuit breaker, Indiana’s current circuit breaker is really a cap and not a circuit breaker because it is based on assessed value rather than a taxpayer’s ability to pay. A circuit breaker program can be targeted to homeowners, renters, and special populations, such as the elderly and disabled.

Eighteen states, including Illinois and Michigan, currently utilize traditional circuit breaker programs to provide more than $3 billion per year in property tax relief (Lyons et. al 1). Sixteen, of the eighteen states that offer circuit breakers, make them available to both homeowners and renters. These programs vary in scope and administration. States typically deliver the program through a direct rebate check, an income tax credit, or through a credit on future property tax bills. All circuit breakers set a maximum income ceiling; households above these thresholds do not qualify for circuit breakers.

Indiana currently offers property tax relief to homeowners and renters through all of the mechanisms listed above; however, the relief is not targeted. One of the benefits of a traditional circuit breaker is that it can be targeted to specific populations or demographics within a state. Two of Indiana’s neighboring states, Illinois and Michigan, utilize this mechanism to deliver
property tax relief in a targeted manner. Ohio and Kentucky currently do not have circuit breaker programs.

Michigan has the most expansive circuit breaker program of all the eighteen states that have a program. Tables are available which provide detailed information about this program.

Governor Mitch Daniels’ Property Tax Reform Plan recommends circuit breakers for homeowners by capping property taxes at 1 percent of the homes assessed value. In addition, his plan goes a step further and also provides circuit breakers for rental properties and businesses, capping property taxes at 2 percent and 3 percent respectively.
Representative Orentlicher’s Property Tax Reform Plan also recommends circuit breakers of 1.5 percent for homeowners, which would limit property taxes in 2007 to 1.5 percent of the homeowner’s assessed property value. In 2008, the plan proposes a 62 percent reduction in property taxes for homeowners and rental properties. In addition, his plan caps property taxes so they would not exceed a certain percentage of homeowner’s income. This is especially important for Hoosiers with low and/or fixed incomes.

However, both of these proposals are caps on assessed value and not traditional circuit breakers. These are a few of the many options state legislators and the Governor can utilize to provide property tax relief in the future.

Please RSVP about Wed.'s meeting to me or Jenny and Ed, 916 4202 or jse64art@sbcglobal.net

Laurie Klinger
637-6242