By Bryan Corbin, Evansville Courier & Press
INDIANAPOLIS - Gov. Mitch Daniels now says Indiana homeowners would see on average a 38.6 percent reduction in their 2009 property taxes under a tax reform plan to be presented to a state legislative committee Monday.
That's slightly more than the one-third reduction the governor predicted when he unveiled his reform proposal Oct. 23.
In Southwestern Indiana, Knox County residential taxpayers would proportionally receive the greatest relief - a 41.2 percent reduction, compared to what they otherwise would pay in 2009 without Daniels' plan. Homeowners in nearby counties would see similar reductions on their property tax bills: Pike would see an average 40.2 percent reduction, Posey, 39.2 percent and Gibson, 39.8 percent.
Average reductions in other counties would be closer to the one-third goal Daniels originally set: Vanderburgh's reduction would be 33.5 percent; Warrick's, 34.2 percent.
The administration released those newly-crunched numbers from the Legislative Services Agency on Friday, in advance of the House Ways and Means Committee's first hearing on the Daniels plan Monday.
The projections do not mean that tax bills would be cut by 38.6 percent for homeowners from current levels, but rather from higher future bills expected to grow in 2009 because of local spending and declining state relief.
Spending limits
Capping the amount of property taxes that homeowners must pay by imposing so-called tax "circuit breakers" would limit the amount of revenue that local governments spend on services, however.
The administration estimated that all levels of government in Vanderburgh County - city, county, school, library and township - would spend a total of $365.3 million in 2010.
Under the governor's plan, the circuit breakers would reduce that revenue by $8.9 million requiring local officials to cut spending to make up the 2.45 percent shortfall.
Evansville City Council President Keith Jarboe said he dislikes paying property taxes as much as anyone, but he is concerned the circuit breakers will affect the city's ability to provide essential services, such as police and fire protection.
Property taxes currently generate about $6.5 billion a year for local governments. Current circuit breakers in existing law are predicted to provide $381 million in property tax relief. By expanding and speeding up implementation of those circuit breakers, Daniels' plan would raise $703 million in property tax relief in 2009 and $748 million in 2010.
For 85 of the 92 counties, the administration estimated, the impact of the circuit breakers would be 5 percent or less.
Knox County would be the most greatly affected in Southwestern Indiana. If all its local government units spent $72.6 million in 2010 as projected, the current and proposed caps would reduce that by $4.6 million, or by 6.4 percent, the estimates showed.
Daniels' plan would cap homeowner property taxes at 1 percent of a home's assessed value beginning in 2009, with limits of 2 percent for rental property and 3 percent for business property.
State Rep. Kreg Battles, who represents parts of Knox, Gibson and Pike counties, serves on the Ways and Means Committee that will hear the proposal Monday. While Battles praised the governor's plan as a good starting point, lawmakers should not be locked into it, he said.
"My personal goal is to listen and learn, and to take the best parts of all the plans to end up with the most relief and the best reform, long term," Battles, D-Vincennes, said.
Other changes
Besides new spending limits on local governments, the plan includes expanded exemptions for homeowners; elimination of elected assessors to be replaced by a single appointed one in each county; and a requirement that all major, local government and school construction projects be voted on in a public referendum.
The state would assume three major costs now funded by property taxes: school operating costs, school transportation costs and child-welfare expenses. To pay for property tax relief, the state sales tax would increase from 6 percent to 7 percent.
Monday's Ways and Means Committee hearing in Indianapolis will be followed one week later by a hearing in Evansville. That Dec. 10 hearing on the proposal will be in Carter Hall at the University of Southern Indiana, starting at 10 a.m..
Jarboe, who plans to attend the local hearing, said, "I'm tired of seeing temporary fixes. We have a real problem, and we need real solutions to this real problem that is putting a stranglehold on economic development and the ability of folks in Indiana to own a home."
The Associated Press contributed to this report.