Most tax bills lack enough support to get through the General Assembly

INDIANAPOLIS — Lawmakers weren’t in a spending mood Thursday. They tossed out a number of proposed and existing taxes as the session moved into full swing.

A new cigarette tax is dead, a 2 percent property tax cap for the entire state survived, a plan for completely eliminating property taxes passed but drew a cold shoulder from the Senate, and the power for communities to add taxes hit a brick wall.

Gov. Mitch Daniel’s proposal to raise the cigarette tax 25 cents failed to make it out of the public health committee by the Thursday deadline. This is the second year in a row that a tax plan by the governor fizzled before leaving the House.

“We wanted to know where the money was going to be spent,” said Rep. Charlie Brown, D-Gary.

Brown said he and other Democrats on the Public Health Committee supported the governor’s rationale that increasing the tax on cigarettes effectively curbs teen smoking. But they wanted to see the money earmarked for health-related programs and not used to support the state’s bottom line.

The administration had been reluctant to detail where the money would be spent, preferring to focus on the public health benefits of raising the tax.

House lawmakers did pass a broad property tax bill in House Bill 1001 that would begin the process of removing child welfare from the property tax rolls over time, by having the state pick up the cost of the state-run program.

The bill also contained language by Rep. Ralph Ayres, R-Chesterton, that would make the 2 percent property tax cap mandatory around the state.

“It’s good policy to protect homeowners from high taxes,” Ayres said.

Only 38 of the 92 counties have homes with taxes higher than 2 percent of their assessed value — only one home in Porter County would currently qualify. Lake County is the only county to enact a cap under an existing law. In Lake County, 31,830 properties qualified for the tax break.

A bill with similar language, sponsored by Sen. Frank Mrvan, D-Hammond, and Sen. Sue Landske, R-Cedar Lake, passed the Senate Thursday, which, among other things, would make the cap permanent and require local units of government to pay for it out of their share of property taxes.

But no measure was more sweeping than a late hour amendment to HB 1001, by Rep. Chet Dobis, D-Merrillville, which would eliminate the entire property tax system in 2009. The bill does not provide a way to pay for the cut.

Dobis told lawmakers it would hold their feet to the fire, to find a solution to the billions in lost local revenue. Even so, Senate fiscal leaders pronounced the idea dead on arrival.

Dobis also proposed giving counties the ability to impose a property tax amnesty period, similar to the income tax amnesty program that drew more than $100 million to the state. Though it was added with overwhelming bi-partisan support, some lawmakers questioned whether major industry should be allowed to forego fees and penalties.

“I support doing this for homeowners but It would costs millions in East Chicago,” said Rep. John Aguilera, D-East Chicago.

HB 1001 also took away the roll of assessing from township trustees and gave it to the county assessor. The bill did not eliminate the separately elected township assessors, which the governor recommended in his more sweeping local government plan.

The bill also eliminated the tiny and antiquated dog tax collected in some counties and administered by township trustees. It also lowered the annual increases in property taxes by local government to 3 percent. HB 1001 now moves onto the Senate.

Other taxes seemed to have died at the deadline Thursday.

The Indiana Association of Cities and Towns and the governor had separate plans that would have given communities more authority to impose other taxes, beyond property taxes, such as income, sales and hotel/motel taxes.

Each plan required at least half the money be delegated to lowering property taxes. Neither plan came to a vote before the deadline, in the House Ways and Means Committee.

Chairman Jeff Espich, R-Uniondale, said he did not want to give communities more authority to raise money.