It’s always popular for politicians to promise to cut your taxes. But is it realistic?
Small changes are absolutely possible, and Indiana lawmakers have cut taxes regularly over the last decade. But some of the proposals being tossed around this year are approaching clickbait at their worst.
Property taxes are getting most of the attention as property values skyrocket with the hot housing market.
Assessed value growth doesn’t automatically mean your taxes will go up because the second part of that calculation is the tax rate charged by local governments. But it has a high correlation.
Property taxes bring in about $8.2 billion a year. And it would be higher, except that lawmakers have created deductions, credits and caps that save property owners an additional $1.5 billion a year.
Before I go further, I want to emphasize that I don’t have any problem with Indiana’s property tax system. I expect my bill to go up because the cost to run cities, towns, schools and libraries goes up. Maybe that’s a firefighter’s salary or the materials to pave a road, insurance for teachers or the cost to run a judicial system that protects the public.
But I do think the assessment system leaves something to be desired.
Most people don’t understand it. The values are based largely on sales of similar properties to your own and it’s difficult to grasp that. It’s even harder to contest it without a specific appraisal of your property.
A few years ago, we noticed our assessment starting to rise and we decided to monitor it. It kept growing until we disagreed our house was worth that much. It just so happened that, near that time, we had done an appraisal of our home for a home equity loan.
We appealed and our assessed value was lowered by around $100,000.
But not everyone can afford an appraisal. My preference would be that lawmakers consider an annual cap on how much assessed value can rise. This would give local governments some room for revenue growth but also keep in mind that some Hoosiers — especially those on fixed incomes — simply can’t afford large jumps in property tax bills.
I took Lt. Gov. Suzanne Crouch to task in the primary for her “axe the tax” proposal because she wanted to eliminate the income tax but didn’t offer any specific budget cuts to accommodate the potential $8 billion annual loss to state revenues.
I feel I should do the same with Libertarian Donald Rainwater’s property tax plan in his campaign for governor.
He wants to cap residential and agricultural property tax bills – not assessments – at 1% of the purchase price of the property. Additionally, property owners would only pay a maximum of 7% of the purchase price, whether they paid for the property all at once at closing or escrowed the amount and paid 1% per year for 7 years. He says this would provide owners with predictability and stability.
Yes, it would definitely save taxpayers money — though Rainwater offers no estimate on how much. Billions, likely. But savings mean a loss to governments trying to service their citizens, a fact that can’t be ignored.
It would mean many homeowners would pay nothing after seven years, while expecting their services to continue or even improve in quality.
As a result, Rainwater wants state government, which in recent years has experienced higher than usual revenue, to backfill at least some of that loss. The state has previously engaged in backfilling but there’s little appetite among lawmakers to get back into that business.
Word is that Republican gubernatorial nominee Mike Braun will soon have a property tax plan as well. I welcome an addition to the conversation but hope he will include specifics so it can be fairly judged by voters.
It’s not enough to say “let’s cut taxes” or that government can be “more efficient.” Voters deserve specific, constructive and realistic plans.