Taxing question with few answers

Post-Tribune
John Byrne staff writer

7/29/2007

Property tax radicalization is striking Hoosiers, as it already has homeowners from other parts of the country.

Calls for statewide property tax abolition received loud applause at a recent hearing in Indianapolis by the Commission on State Tax and Financing Policy, according to the Associated Press. Angry homeowners have also picketed Gov. Mitch Daniels' house, and Marion County assessors requested police protection this spring from taxpayers furious over the results of this year's "trending" property reassessment.

But what's the alternative?

Indiana voters can look around the country to see other states taking much more aggressive steps to curb property tax growth. The jury's still out, though, on whether those changes will be effective long-term solutions -- or just bring about a new set of problems.

Vermont Taxes rise despite shift.

Curtis Dubay, economist for the Washington, D.C.-based tax research group the Tax Foundation, aimed his ire at the public entities that spend property tax dollars.

Like Gov. Mitch Daniels, who created a commission this month chaired by former Gov. Joe Kernan and Supreme Court Justice Randall Shepard to recommend ways to lower property taxes by streamlining government, Dubay said local taxing units are to blame for the mess.

"People should be angry not with the real estate market, but with their local governments," Dubay said. "Yes, the real estate prices are going up, and that's a factor. But the budgets are driving it."

Dubay pointed to Vermont, where the state took over school funding in an attempt to curb some of the highest property tax rates in the nation, as an example.

"The state still had to get the money for the school from somewhere, so they raised other types of taxes," Dubay said. "In the meantime, property taxes kept rising because of local spending in other budgets, and they're worse than before."

Casino states Earmarking revenue.

Nevada pioneered the large-scale gambling taxes Indiana has tapped with increasing frequency to fund property tax relief packages and other initiatives that require infusions of cash.

Pennsylvania, Mississippi and other states have earmarked casino tax revenue as the best way to ease the property tax burden as well. Pennsylvania lawmakers also are considering broadening the state's sales tax as a way to meet budget shortfalls.

Kenley chairs the Commission on State Tax and Financing Policy. He points to income taxes as a more equitable way to pay for public agencies.

And earlier this year, the Indiana General Assembly passed legislation requiring Lake County to enact a 1 percent income tax for 2008. The Lake County Council last week sent Daniels a letter asking him to repeal the legislation because, among other things, the people who would pay the most would benefit the least from the distribution of the estimated $80 million that would be raised annually.

An increased cigarette tax was enacted by state legislators this year to subsidize a sweeping public healthcare plan. Kenley was not prepared to concede Indiana needs to try something more radical to get property taxes under control. "Those programs have had mixed results," Kenley said. "I think in the one hearing we've had, people have been stridently opposed to the increases in their assessments. It's too early to tell whether that has translated to a widespread desire to take more strident steps to try to keep property taxes down."

Colorado People demand services.

In other states, property tax cuts have frequently led to cuts in services like police and fire protection, compromises voters are unwilling to make.

A taxpayers' bill of rights act passed in Colorado restricted revenue or expenditure growth to the sum of inflation plus population change and required voter approval to override the revenue or spending limits. Yet that widely hailed plan was rendered largely ineffective as residents voted locally to override it so property taxes could go up to fund local programs.

Indiana state Sen. Luke Kenley, R-Noblesville, was an architect of the property tax relief plan the Indiana General Assembly passed this spring as legislators realized trending would likely propel bills to new heights.

Kenley has said his proposal would largely avoid those pitfalls, thanks to built-in income tax options available to counties to bolster public safety budgets. But he acknowledged recently that tougher measures may be necessary.

"I think we're going to have to look at all those options," Kenley said of laws on the books around the country. "We need a holistic approach to the problem."

Arizona Voters seek legal relief.

In Arizona, members of Arizona Tax Revolt are trying to amend the state constitution to halt escalating tax bills, arguing a recent law meant to protect homeowners has failed. The group is trying to collect 230,000 signatures to get two separate initiatives on the ballot in 2008.

One would roll back the assessed values of residential properties to their 2003 amounts.

Though Arizona voters approved the Taxpayer Protection initiative in 2006, limiting the growth of tax levies for many public entities, Arizona Tax Revolt chairman Marc Goldstone said the law's loopholes are allowing property taxes to keep rising beyond residents' ability to pay.

"That law exempted school districts, fire protection districts and other special taxing districts from the limits," Goldstone said. "Our ballot initiative would hold them accountable as well."

The red-hot real estate market in Arizona has left longtime residents in the lurch, Goldstone said.

"Property taxpayers are left to face the effects of rapid valuation in the real estate market," he said. "Valuations have in some cases gone up hundreds of percent over the past few years. We're just totally exposed, and we need better protection."

Indiana Still looking for answers .

The recent brouhaha in Marion County has validated the work of local tax watchdogs who have until recently lived on the fringes of the statewide tax debate with their ideas for reform.

The Miller Citizen Corp.'s Web site touting the benefits of a tax on polluters has seen heavy traffic from around the state since people started getting their assessments and tax bills in the mail, according to George Rogge, the group's president.

While the MCC was a key player in designing the 2 percent property tax cap, it has had a hard time gaining traction in Indianapolis with the pollution tax proposal. Rogge thinks recent developments in Marion County could help the idea get another look from lawmakers.

"Pollution is something we shouldn't have, so it makes sense to tax it," Rogge said, likening airborne pollutants to smoking. "Maybe this situation in some of the other counties around the state will convince more people to consider it."

Wes Miller, the Hammond landlord who founded the anti-property tax organization Team Hammond, said the group will hold a meeting Tuesday night at the Woodmar United Methodist Church to rally in response to this year's property assessments.

"I'm not gloating, because I don't like to see these kinds of troubles befalling other people, but I'm hoping now that people from around the state realize we as voters and taxpayers need to band together to do something about this," Miller said.