Legislative leaders have made clear that they intend to act on Gov. Mike Braun’s central campaign promise to provide property tax relief. However, with less than a month left to pass a solution, leaders have yet to announce agreement on an approach.
Three vastly different proposals have been discussed so far with varying levels of homeowner relief and local government impact. It’s unclear what dominant ideology lawmakers plan to focus on and whether lawmakers will resurrect a previous plan or introduce a new one before an April 10 deadline for action by the House Ways and Means Committee, which handles fiscal policy.
“You cannot have three proposals or three concepts that are any more different,” Matt Greller, CEO of AIM (formerly the Indiana Association of Cities and Towns), told IBJ. “I worry about unintended consequences at this point, of things that haven’t been completely vetted or analyzed.”
Leaders are adamant they will pass Senate Bill 1, the primary legislative vehicle to deliver tax relief this year. They say they are working to find a compromise that will balance widespread relief with adequate funding for local governments, whose services heavily rely on property tax revenue.
Homeowners have felt the pinch after property tax bills spiked from market-driven assessed value increases during the pandemic-era housing boom. In 2023, tax bills increased by an average of 17%, according to an analysis by tax expert Larry DeBoer.
The House Ways and Means Committee will hear an amendment to the bill in the coming days or weeks, which could be the Legislature’s agreed-upon plan forward. Braun said in mid-March that the final bill would probably include several ideas already on the table.
“My prediction is what we’re going to end up with is going to be a combination of every single thing you see at this point and a lot of what I had in there,” he told reporters. “At this point, it’s still early in the process.”
When asked what to expect from the final proposal, House Speaker Todd Huston, R-Fishers, told reporters on March 21 that the plan will reduce most taxpayers’ 2026 bills below what they will pay in 2025. He said lawmakers want to level spikes in property tax increases while still funding local governments.
“I’m certainly optimistic we’re going to get to the right place in the next few weeks, but it’s complicated,” Huston told reporters March 14. “Anybody who says this is simple is being a little disingenuous. It’s not simple, but we’ll feel good about where we are.”
Property tax legislation would need to be passed before April 29. Braun must then decide to sign the bill or veto it, which he has threatened to do if the relief provided isn’t to his liking.
Three proposals, three approaches
For the most part, the three proposals don’t overlap in how they would provide homeowner property relief. How the system will allow taxes to increase moving forward is the key difference, which also affects how much homeowners will save and how soon.
The impact of Braun’s plan would be the most immediate and widespread of the three proposals, experts have said. He campaigned on a property tax plan that would establish tax bill growth caps and significantly increase the homestead deduction.
The proposal would strip local governments of about $1.2 billion of expected revenue in its first year and compound thereafter, according to the bill’s fiscal analysis.
Sen. Travis Holdman, R-Markle, pivoted from Braun’s attempt to provide immediate relief in the plan he crafted and was eventually passed by the Senate. The Senate proposal slows down and scales back tax relief in Braun’s plan. The Senate version hinges on limiting growth of the levy, or the total amount of property tax revenue that local governments and schools can collect.
Though the proposal does less to directly cut individual tax bills, it would reduce taxes significantly over time by limiting the growth in how much a local government can collect.
The bill passed the Senate 37-10. Senators said during debate they were not convinced they had found the right answer, and Braun later said the bill had “a long way to go before it gets my signature.” Braun specifically said the bill needed larger tax cuts for homeowners.
When the bill made it to the House Ways and Means Committee, Chair Jeff Thompson introduced a 238-page amendment that likely wouldn’t mean signficant immediate change in homeowners’ bills but would alter how the system calculates tax bills. Thompson and experts say the change could simplify the property tax system overall.
The proposal reworks the existing homestead deduction and makes changes that result in the local tax rate—with all local governments added together—couldn’t be higher than 3% per $100 in assessed value. Under the proposal, Thompson said all homeowners would hit the constitutional cap for homeowners of 1% of assessed value.
Under Thompson’s plan, a new homestead deduction would reduce homeowners’ assessed value to a third of its starting value.
Stephanie Wells, president of the Indiana Fiscal Policy Institute, said Thompson’s plan is less about finding property tax relief but more about reforming the system going forward. The plan would create modest homeowner savings over time as the legislation is phased in but would fluctuate year-to-year.
“It’s a misnomer to call this the property tax bill,” Wells said. “It’s really government finance reform.”
The proposal would also remake the process for how municipalities collect local income taxes, which is a key revenue replacement solution Republicans have said could make up for property tax cuts.
What’s next
Leaders and the Governor’s Office are still hashing out which direction they want to go with SB 1. The House Ways and Means committee will amend the bill—likely with their compromised solution—before the April 10 committee deadline.
The bill could still change after the committee’s approval. Members of the House will be able to offer amendments when the bill reaches the House floor. And the bill could go to a conference committee, where fiscal leaders of the House and Senate work to come up with a compromise.
“I am certain that they will pass some sort of relief,” Wells said. “I think they’ve got a fair amount of compromise that they have to figure out to get something done.”
With so little time left, some observers are left worried about whether there is enough time to assess the impacts of property tax reform before passage. AIM’s Greller said local officials are advocating for more targeted tax relief and a revenue replacement mechanism to provide relief and ease the burden on local government.
“Anytime you have proposals of this significance … you almost have to go through for each governmental unit, a parcel-by-parcel analysis, to truly understand what the impacts are,” Greller said. “The impacts can be so very so different from community to community.”