Property Tax Reform To Lower Tax Bills

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(STATEHOUSE) - The latest property-tax reform plan at the Statehouse could lower your tax bill by nearly two-thirds in four years, in exchange for new income taxes of as much as 1.2-percent.

The Senate Tax and Fiscal Policy Committee unanimously approved chairman Luke Kenley's bill to have the state pay for schools directly, instead of paying property-tax relief to make up for tax hikes the schools propose. The 800-million dollars to pay for it would come from licensing fees for slot machines at horse-racing tracks, a bill still pending in the house.

Kenley (R-noblesville) says the state can still act even if the slots bill doesn't pass, but would have to decide where tax relief ranks among other budget priorities. The bill cuts property taxes five-percent this year, rising to an estimated 13-percent in three years. It also offers local governments two optional income taxes which could push property taxes down as much as 62-percent.

One income tax would help cities and counties close shortfalls in their budgets. The other would let them make a dollar-for-dollar trade of property taxes for income taxes.

Kenley says there would be no net increase in local taxes, and mayors from across the state agreed, protesting additional money is what they need to close budget shortfalls. The bill does give local government some relief.

A "circuit breaker" law passed two years ago bars property-tax bills of more than two-percent of a property's assessed value. Kenley's bill would keep that limit in place for homeowners, but raise it to three-percent for businesses.

Counties have complained the combination of the circuit breaker and the state's frozen tax levy is forcing their budgets down. Kenley says loosening the circuit breaker would fix that problem everywhere except Lake and St. Joseph counties.

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