By the time you read this column, you’ll have enjoyed the end of this year’s legislative session. But as I write this column, what that mindless body of men and women has done is unknown.
It seems they are reducing property taxes for homeowners, business owners and farmers, thereby again treading on the toes of local governments. Compensating for this unnecessary act, the Indiana General Assembly is authorizing an increase in the local income tax.
This, if true, might focus our neighbors on more than library books, the gender of toilet users, and other topics of continuing interest to the congenitally confused.
Income is the issue. Why are people complaining about prices? Why are small and medium sized towns dying? Why is housing so expensive?
Yes, these are national issues, but they have special meaning in Indiana because our per capita income ($64,077 in 2024) was 12.5% below the national figure) . Put differently, if a person makes $80,000 a year nationally, a Hoosier will make only $70,000.
Now I hear it again: “But our cost of living is lower.” To which I reply: The biggest price differentials nationally are in housing, not corn flakes or eggs. And housing prices are determined by the income of the seller to maintain the property, and, ultimately, by the income of the buyer.
Our 2024 median costs of housing was $12,984, ranked 39th among the states. Our median household income was $71,959, 42nd in the U.S. This gave us housing costs at 18% of income. The correlation nationally of median household income and median housing costs was 0.93, a very strong relationship.
Lowering property taxes will do little to increase the number of housing units available for sale or rent. My annual property taxes are less than 2% of the value of my property (based on recent sales in my area). How much do you think I’m going to lower the asking price on my home because 2% is lowered to 1.7%, even though that would be a 15% drop in my tax bill?
What the legislature has done is trivial and wrongheaded. If we have a housing shortage, then we have to get more existing housing ready for occupancy or demolished and rebuilt. That’s costly and who is going to pay for it?
The Indiana General Assembly likes to pass bills that mollify a small group of voters. On serious matters, legislators recognize and acknowledge their efforts are short-sighted, to be corrected and changed in a future session. The next move generally is also unsatisfactory. They’ll claim there isn’t enough time to do the job correctly.
The can continues down the road and Hoosiers learn to live with an inadequate process and contempt for their elected leaders.