By Eric Bradner, Evansville Courier & Press
INDIANAPOLIS - One of the first major votes Indiana lawmakers will cast after the General Assembly reconvenes Jan. 5 will be whether to write property tax caps into Indiana's constitution.
Since the constitutional amendment already has passed committees in both the House and the Senate, legislators could begin debate and even vote in January.
If, as expected, it passes both the Republican-led Senate and the Democratic-controlled House, Hoosier voters will have the final say in a November 2010 statewide referendum.
The amendment has sparked vigorous debate between firefighters, educators and local government officials who rely on property taxes, at least in part, to fund their work, and home-owners who have traveled to the Statehouse to lobby for permanent relief.
The caps limit property taxes to no more than 1 percent of the assessed value of homes, 2 percent for farms and rental property and 3 percent for businesses.
County hiring freeze
The tax caps have forced Vanderburgh County government to freeze hiring and decline to replace those who have left their jobs recently. Steve Melcher, vice president of the Vanderburgh County Commissioners, said county officials are brainstorming ways to save money.
He says the economic downturn has left county governments strapped for cash, and now is not the time to make the tax caps permanent.
"With the way this economy is going down, the Legislature should wait to see how this plays out," he said.
They've also put the pinch on school districts, which rely on property tax money to fund items such as transportation and construction.
Dan Clark, deputy director of the Indiana State Teachers Association, said that while caps have not cost schools yet, they eventually will lose $100 million in transportation and construction funds.
School operating costs
As the teachers association encourages the General Assembly to allow schools to tap as much as 5 percent of those funds, rather than the current limit of 3.5 percent, to pay for general operating costs, the caps could cause some pain.
"They're clearly not a good thing," Clark said.
However, homeowners who have faced soaring property tax rates in recent years say they've been pushed to the brink. They say the caps are necessary because they simply can't pay any more.
Effect on homeowners
Charlene Williamson, who has lived in Downtown Evansville for seven years, said she pays much less for her house here than she did for the Chicago condominium where she lived previously.
Still, she's seen her property taxes almost triple, to $1,660 last year, since she purchased her home on Southeast First Street.
And because the house is in the city's historical district, Williamson also must abide by certain standards of authenticity when making improvements or restorations.
"It's affects me a lot," she said. "With property taxes continuing to go up, that means less money for improvements."
Williamson's home was built in 1865, and because of the size and age of the home, she said it needs constant upkeep. It's a trend she's seen with many of the homes in the area, she added.
"(Higher taxes) have caused me to cut back on the inside of the home," she said. "And if you don't keep up with the interior, the exterior of the house is likely to go, too."
When Bob Marx purchased his home on Eichel Avenue 18 years ago, he paid $19,000 for it. Now, he pays more than $1,100 in property taxes.
Marx is out of work and receives disability benefits. With a fixed income, it's almost impossible for him to afford the home repairs he'd like to make.
"I was just telling someone the other day that I can't remember the last time I bought something new for the house," he said. "The oven and refrigerator have never been replaced and are still working fine, knock on wood."
Doralee Turpin has lived atop Reitz Hill for more than 40 years. She and her husband are retired and live on a fixed income.
In the past, the couple have taken two or three "big vacations" together every year.
Since the economic downturn, their property tax bills have nearly doubled, to about $1,140 last year, and have forced them to alter their spending habits.
"We've adapted to it and tried not to make any big purchases that we didn't have to," she said.
Business taxes
The General Assembly earlier this year passed legislation aimed at bolstering Indiana's bankrupt unemployment insurance fund and helping repay a debt to the federal government that is expected to be near $1.5 billion by the end of this year, in part by raising payroll tax rates.
However, Senate President Pro Tem David Long, R-Fort Wayne, and other Republicans have argued that the economic downturn is longer and deeper than many realized.
Therefore, he said, lawmakers should push back those higher tax rates by at least one year.
The Indiana Chamber of Commerce is backing the Senate Republican plan. Chamber officials say that with 40 states facing similar struggles, Congress might have to act, and Indiana shouldn't raise its tax rates until the picture becomes clearer.
The new rates take effect Jan. 1, but since businesses won't have to pay until after the end of the first fiscal quarter, Long said, there is time for legislators to act during the coming session.
Staff writer Seth Grundhoefer contributed to this report.