INDIANAPOLIS | Local officials would get relief from the circuit breaker property tax cap and more power to shift costs to county-level income taxes under a tentative agreement reached Friday.
The size of tax breaks for homeowners remains the major point of contention with only two days left in the legislative session. And negotiators say clearing that impasse is crucial to reaching a budget accord before lawmakers adjourn on Sunday.
New projections showing homeowners could face a 24 percent spike in annual tax bills led negotiators to suggest spending $220 million on fall homestead credits that would cut the anticipated hike in half. But House Republicans are demanding the state allocate $350 million to bring the average increase for homeowners down to about 6 percent.
"We're looking to squeeze every extra dime and put it toward property tax relief," said House Minority Leader Brian Bosma, R-Indianapolis.
Negotiators offered another $240 million in homestead credits for 2008, but House Republicans want the bar raised to $300 million.
The tax relief would be bankrolled by a tentative agreement to charge a pair of struggling southern Indiana horse racing tracks $250 million apiece for the right to install 2,000 slot machines at each facility.
Horseshoe Casino in Hammond would have to ante up an estimated $30 million to continue with its plan to build a new 350,000-square-foot facility. Resorts East Chicago and Majestic Star Casino in Gary would have until 2009 to decide whether they want to pay the same $25 million fee -- plus $300 per new square foot of gaming space -- to construct similar gambling barges.
Aside from the dispute over how much direct relief to send homeowners, "the slots bill and the property tax bill are pretty well complete," said Noblesville Sen. Luke Kenley, a top Senate Republican negotiator.
The circuit breaker would stay at 2 percent for homeowners statewide, meaning they would pay no more than $2,000 in taxes on a home assessed at $100,000.
"Everybody else will go to 3 percent, which solves some of the issues that Lake County has," said Rep. Bob Kuzman, D-Crown Point.
Boosting the circuit breaker to 3 percent for landlords and businesses would cut resulting budget shortfalls in Lake County from $223 million to $126 million. Lawmakers also plan to shield school operating funds from budget losses triggered by the tax cap.
Legislators plan to let all 92 counties impose new income taxes to shift future spending off the backs of property owners, but Lake County first would have to adopt one of several income taxes already on the books. Counties that also dedicate an income tax of at least 0.25 percent to property tax relief could impose another 0.25 percent income tax to boost local police and fire budgets.
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