Property Tax Relief
Issue Overview: Before the start of the 2007 legislative session, the members of the Indiana General Assembly declared some form of property tax relief was among their top priorities. With property-tax rates initially expected to increase statewide by an average of 15 percent, momentum was clearly behind making such a change. However, less than two weeks before adjournment, legislative leaders learned the average property tax increase for taxpayers was projected to be 24 percent statewide. During the last remaining days of the 2007 session, an infusion of $550 million dollars for short-term relief was provided, along with the following plan for long-term relief:
- The homestead deduction for 2008 is $45,000, with it then decreasing by $1,000 each year until it reaches $40,000.
- The property tax circuit breaker remains at 2 percent for homestead property in 2008 and 2009. Starting in 2010 the circuit breaker is 2 percent for homestead property and 3 percent for non-homestead property.
- Counties are given the ability to adopt new local option income taxes (LOIT).
- The first LOIT that a county may adopt would replace the property tax revenue that would have been raised due to the growth in local tax levies. The Department of Local Government Finance will set the rate, which may not exceed 1 percent.
- The second LOIT that a county may adopt at a maximum rate of 1 percent would provide direct property tax relief by allowing the LOIT to be used in one of three ways: as a property tax replacement credit, as additional homestead credits or as property tax credits for qualified residential property.
- Finally, the third LOIT that a county may adopt would be for public safety purposes and may not exceed 0.25 percent. However, this LOIT can only be adopted if the first two LOIT's are adopted.
- A Capital Projects Review Board is to be established in each county beginning Jan. 1, 2009. The board would be tasked with overseeing all capital projects in excess of $7,000,000. In addition, the board will review capital projects plans that each political subdivision must complete every two years.
NFIB Position: According to a recent survey, NFIB/Indiana members oppose local option income tax increases as a way to combat rising property tax levels. In addition, NFIB opposes raising the circuit breaker for non-homestead property to 3 percent.
Issue Status: HB 1478 was the legislative vehicle for the above changes. It was passed during the last days of the 2007 session. It passed by a vote of 74-25 in the House and by a vote of 47-3 in the Senate.
Despite these efforts, property tax reform remains the most urgent issue facing the Legislature. As such, two separate commissions are currently studying the issue with the intention of major reform to be debated and implemented during the 2008 legislative session.
