GARY -- Size will matter if Indiana voters approve a referendum making property tax caps part of the state constitution, a professor and tax expert told the Quality of Life Council on Friday.
Not everyone will see relief, but homeowners with properties with higher assessed valuations, larger taxing districts, particularly cities and towns with a number of taxing entities in them, and landlords will, said Larry DeBoer, an economist at Purdue University.
A constitutional amendment may be popular with voters, but the other side of tax caps -- governments trying to provide the same amount of services with less revenue -- seems to escape many people, he said.
"For local governments, this is gloomy news, but for taxpayers, this is good news," DeBoer said.
In 2008, the Indiana legislature passed a law that would eventually cap property tax caps at 1 percent of assessed valuation for homes, 2 percent for rental properties and 3 percent for businesses.
Indiana voters will get a chance to vote to make those caps a permanent part of the constitution in the Nov. 2 general election.
DeBoer offered scenarios on how the caps affect property owners. For example, a homeowner with a homestead value of $250,000 would have about $130,000 of assessed valuation (AV) after various deductions.
If that property is in a city, with multiple taxing entities like schools, libraries, sanitary districts and the municipality itself, with a rate of $2.50 per $100 AV, his tax bill would be about $3,250.
Add the 1 percent tax cap, and the tax bill drops to $2,500, for a $756 reduction.
That's the good news for the homeowner, but the other side is the city would have to pick up the tab on the amount the cap knocked off, DeBoer said.
In the case of cities and towns, governments will have to run even leaner or charge more users fees for everything from local swimming pools to garbage collection, he said.
In places like Lake County, where cities like Gary and East Chicago saw tax rates of more than $6 to $7 per $100 assessed valuation, respectively, before 2009, the hit on government has been enormous.
That's more bad news for cities and towns already reeling from the tax caps, said state Rep. Charlie Brown, D-Gary, criticizing the caps as "tying the state government's hands."
"Gary's devastated, and will continue to be devastated," he said, adding the Friday panel did not include anyone from Gary, one of the most affected districts in the state. "The only solution is to attract more businesses and employment, or else Gary can just turn off the lights."
Across the region, the tax caps have had relatively minimal effect on Valparaiso, but whatever affects the region ultimately affects Valparaiso and vice-versa, said Mayor Jon Costas, one of the panel members Friday.
"Valpo would have more people and businesses if people driving by on the Toll Road saw Gary as a healthy, vibrant, robust city," said Costas, who supports the tax caps.