03/24/2009 - House votes to speed caps on property taxes (Indianapolis Star)

House votes to speed caps on property taxes

Proposal would lower state levies this year, not waiting until 2010

By Bill Ruthhart
.(JavaScript must be enabled to view this email address)

The Indiana House voted Monday to accelerate implementation of the state's property tax caps, a move that could provide $200 million in relief for taxpayers this year but hurt local governments already struggling with sagging revenues.

Democrats insisted the move would save taxpayers money during a deepening recession. Republicans voted for the measure but called it a "phony measure" aimed at drawing attention away from the GOP's push to make the tax caps permanent by placing them into the state constitution.

Sen. Luke Kenley, R-Noblesville, said the Republican-controlled Senate is unlikely to agree to the legislation because it would "cut the throats of local government."

Under the property tax legislation passed last year, 2009 property taxes are capped at 1.5 percent of a home's assessed value. The caps are 2.5 percent for rental properties and 3.5 percent for businesses.

In 2010, those caps are scheduled to be reduced to 1 percent, 2 percent and 3 percent, but House lawmakers voted Monday to speed up that phase-in. The proposal would make the lower caps retroactive to Jan. 1.

"This would put at least $200 million in Hoosier taxpayers' pockets at a time when we have over 300,000 people in Indiana unemployed," said Rep. Bill Crawford, D-Indianapolis, author of the provision.

The proposal passed 85-11.

House Speaker B. Patrick Bauer, D-South Bend, has wanted to put off a vote on the amendment until next year, once the impact of the fully phased-in tax caps and the effect of shrinking revenue on local government is clear. A vote next year, he has argued, would still keep the matter on schedule for a final, public vote in 2010.

House Minority Leader Brian Bosma, R-Indianapolis, said Crawford's proposal Monday served as a "duck and cover" for Democrats on the constitutional caps.

"This is so someone can put out a press release: 'Representative so and so votes for property tax relief.' Do you really believe people will believe this?" Bosma said. "I'm going to vote for this, because I'm for property-tax relief. But I'm for real, permanent property-tax relief, not a press release, not a political mantra."

Kenley, who helped craft the phased-in tax caps last year, said Crawford's plan would "not be fair to local units of government."

Indianapolis Controller David Reynolds said that while Mayor Greg Ballard has supported the tax caps, speeding up their implementation would be "problematic."

The phased-in caps already cut the city's revenue by $6 million for 2009, and the lower caps planned for 2010 would lead to another $15 million in cuts. If the proposal were to become law, the city would have to re-evaluate its budget for this year.

"It's just unfortunate they would throw a monkey wrench in at this point and say, 'Oh, by the way, now you're going to get even less money,' " Reynolds said. "The budget that we passed was just barely balanced, and this would clearly force us to have to take another hard look at our budget this year."

Matt Greller, executive director for the Indiana Association of Cities and Towns, agreed that switching the caps would speed up the already-painful dip in revenue local governments are dealing with.

But he said if the plan does pass the legislature, the deep cuts that would result at the local level might make some lawmakers think twice before making the caps permanent in the constitution.

"In a strange way, it might work to our benefit," Greller said. "We would see what the consequences are sooner and maybe they would look closer at this constitutional amendment."

Crawford's proposal was amended into SB 388, which deals with property tax levies for mental health facilities. The House still must take a final vote on the bill.

If SB 388 passes the House, it would move to a conference committee, where members of the House and Senate would work to resolve their differences on the legislation.