INDIANAPOLIS | Lake County cities, schools and other government units would be spared much of the impending blow of the expanded circuit breaker under a property-tax relief package unveiled Thursday.
Businesses would be forced to forfeit millions in expected breaks under the plan, the latest solution offered by Senate Tax Chairman Luke Kenley, R-Noblesville.
Homeowners and landlords still would see their tax bills capped at 2 percent of gross assessed value, or $2,000 on a $100,000 home. But businesses, which become eligible for the circuit breaker in 2010, wouldn't get a break unless their bills exceed 3 percent of assessed value, or $3 million on a $100 million business.
"It gives business a way to pay their share, since they would benefit from the property tax not going up," Kenley said. "And it will give locals some relief from the circuit breaker disaster they're facing."
State analysts have forecast the circuit breaker will cut local budgets by more than $400 million in 2010, with municipalities shouldering more than half the burden. Kenley estimates that his more exclusive business tax cap could drop the statewide impact by nearly two-thirds, which, if proportional, would drop Lake County's hit from an estimated $223 million to roughly $84 million.
Softening the circuit breaker is just one portion of Kenley's plan, which, if successful, would dramatically alter local government finances.
The state would stop sending property-tax replacement and homestead credits to local governments and instead use that $2 billion to pick up local school operating expenses, juvenile correction programs and a portion of child welfare costs -- programs currently funded by property taxes.
Local governments would break even the first year, and the state would shoulder future growth in those programs.
Shifting those responsibilities to the state is aimed at stemming the growth of property taxes. Kenley's plan would offer further relief to homeowners by freezing property-tax levies at current levels and forcing counties to adopt local-option income taxes to bankroll spending growth.
"The Democrats tried to do property-tax relief in the House, and it was rejected," said state Rep. Bob Kuzman, D-Crown Point. "Senator Kenley stepped up to the plate and is working with us to try give some property-tax relief to the homeowners and also local government."
Kuzman's property-tax plan failed in the House by two votes last month, with critics loudly complaining about a proposed local corporate income tax.
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