State Rep. Jeff Thompson, R-Lizton, left, and state Sen. Travis Holdman, R-Markle, were co-chairmen of the State and Local Tax Review Task Force. Screenshot
Hoosiers should not expect any immediate reduction in their property taxes next year after Republican Gov.-elect Mike Braun takes office.
That's the message from the two Indiana General Assembly finance leaders whose two-year legislative task force recently completed a comprehensive review of state and local tax policies.
State Rep. Jeff Thompson, R-Lizton, and state Sen. Travis Holdman, R-Markle, the co-chairmen of the State and Local Tax Review Task Force, said any tax law changes enacted in 2025 likely will be incremental in nature and their financial impact spread over a number of years so as not to cripple local government spending on education, public safety and other essential services.
"The complexity of this system cannot be fixed to provide overnight relief to any one classification of taxpayer. The process requires a multiyear effort to ease into a reform," Holdman said.
"The legislation you will see introduced this session will take time to fully implement. (Property) tax bills for 2025 cannot be fixed this session further beyond what the Indiana General Assembly has done the last couple of sessions, like capping general fund local levy growth."
Braun repeatedly has said cutting property taxes is among his top priorities when he takes over the governor's office Jan. 13 from term-limited Republican Gov. Eric Holcomb.
On the campaign trail, Braun promised to reset residential property tax bills to 2021 levels, reduce the amount of a home's assessed value subject to tax, strictly limit future property tax increases, and make it more difficult for taxing units to temporarily increase property tax revenue through a voter referendum.
Holdman, who also leads the Senate Tax and Fiscal Policy Committee, said he's been "working closely with the Braun team" and help for Hoosier taxpayers "could be on its way."
But Holdman also acknowledged, "It may take some time to work its way through the established system, as well as the General Assembly."
"The overall tax policy in Indiana is one of the best in the nation," Holdman said. "With regards to property tax, the state of Indiana does not levy property tax from any classification of property taxpayers. The property tax is entirely a local tax. We have nothing to do other than set policy."
The policy seemingly most annoying to Hoosiers is that an increase in the assessed value of their home results in a higher property tax bill — until an owner-occupied home hits the constitutional maximum tax bill of 1% of the property's assessed value.
Thompson, who also leads the budget-writing House Ways and Means Committee, said the recent surges in assessed value growth often generate so much additional money for local governments that even when a unit's governing authority raises or lowers its property tax rate the change is little noticed by the taxpayer.
"At some point you have to have a system where when you raise the rate the taxpayer sees an increase," Thompson said. "(Or, after lowering the rate,) "all the money just goes to other units. The taxpayer doesn't see a penny change."
At the same time, Holdman noted local units of government statewide currently have about $4.8 billion in unused local income tax capacity.
He said local governments interested in reducing property taxes potentially could replace that revenue with higher county income taxes, even as the state continues gradually reducing its individual income tax rate to 2.9% by 2027.
Though Holdman also is interested in pursuing strict spending caps for local governments that more or less match the typically inflation-level annual spending growth at the state level.
"We do not need to be spending much more than a 3.25% increase from one year to the next," Holdman said.
The task force's final report also endorsed reductions in agricultural and business property tax categories that Democratic task force members pointed out would shift onto homeowners an even greater share of the cost of funding local government.
"I see no focused relief for homeowners in here, whatsoever," said state Rep. Ed Delaney, D-Indianapolis. "We're presiding over tax shifts onto homeowners (and) away from businesses. We're doing that."
"I think it's time to get serious about what's happened to the tax caps after 13 years of one-party (Republican) control and 15 or 16 years of the tax caps. I don't think they're working for the homeowners, and I think that's what we should be addressing."
Delaney said part of the problem is Indiana has more than 2,000 local units of government and the General Assembly repeatedly has shied away from eliminating any of them, including the more than 1,000 township governments that duplicate, in many places, services provided by the county or municipalities.
State Sen. David Niezgodski, D-South Bend, said Democrats stand ready to partner with Republicans to begin tackling these issues when lawmakers return to the Statehouse in January for their four-month regular legislative session.
"We absolutely know that taxpayers are crying out for some relief. We know that there is a need out there," Niezgodski said. "We have a lot of work in front of us."
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