TERRE HAUTE — On the Nov. 2 ballot is Public Question No. 1, consisting of 128 words, which starts, “Shall property taxes be limited for all classes of property …” and goes on to describe what is referred to as the 1-2-3 Property Tax Cap Amendment.
The ballot measure is a lengthy one to absorb in the voting booth, so voters should give it considerable thought before trekking to the polls. The consequences of its passage will affect Hoosiers for many years to come. The caps offered in the amendment already are part of state law, and the taxpayers of Indiana need to understand completely the impact that making these caps permanent through a constitutional amendment will have on local services.
We have several concerns, not with the concept of property tax caps, but with this proposed amendment.
First, its approval by voters will deny any future state assemblies the ability to raise property taxes through established legislative processes — no matter Indiana’s fiscal needs. If the permanent caps turn out to be the negative that many fiscal policy analysts have predicted, and changes need to be made to the funding system, it would take a minimum of five years to alter this amendment to the Indiana Constitution.
Equally of concern is the losses that will be suffered by local entities that receive funding from property taxes — and use them to fund public services.
These permanent 1-2-3 caps will mean $500 million less in funding across the state. For those receiving these tax dollars in Vigo County, the total funding decrease will be $17 million. That breaks down to almost $3.4 million less for county government, $6.7 million less for the city of Terre Haute, $3.4 million less for Vigo County School Corp., and $648,000 for the Vigo County Library.
Because each of these bodies already has been forced to markedly reduce spending, all maintain that they will have to look to basic services they provide to make further cuts. These tax-dollar recipients also are quick to point out that jobs have been lost as a result of the decreases and there will be more jobs lost in the future.
If Public Question No. 1 passes, the state constitution would be amended to limit property taxes to 1 percent of the gross assessed value for owner-occupied residences, 2 percent of assessed value for residential property that is rental property and includes apartment units, 2 percent of assessed value for agricultural land, and 3 percent for other real and personal property owned by businesses.
Proponents of the amendment emphasize that this is the best way to ensure that the legislature will be inhibited from conspiring to increase taxes, which will force publicly funded entities to live within the means of the revenues they receive or find creative ways to generate revenue streams that match spending.
Proponents also say stable taxes will spur job creation and help families to budget taxes more predictably. They note that voters are outraged by taxation and spending, and this amendment gives them the opportunity to let their voices be heard.
But as we’ve said, these property tax caps already exist as state law. In response to taxpayer anger over the past several years, the legislature has begun to responsibly limit the taxes its levies. There is no need to engrave permanent caps into the constitution, particularly with no crystal ball to predict the needs of Hoosiers in the future.
It seems that some of our state’s politicians are playing on the emotions of voters with the promise of a tax limit that already has been enacted. More disturbing, it is a falsehood to taxpayers to insist this amendment will prevent higher property taxes. The taxes are on the assessed value of homes and buildings, which are lower than market valuations. As values are reassessed closer to market rates, property taxes are bound to rise.
The existing caps have not been in place long enough to see their full impact on local and state governments, but their partial impact is visible in reduced services and lost jobs. So, what is the hurry to make them permanent? We think it would be prudent to vote no, keep watch on the legislature, then, if necessary, revive this issue in the future when the affect of these changes is more readily evident.
Amending a constitution that has served the state well is serious business. Amending it to severely limit state funding in a time of great economic uncertainty is seriously risky business.