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Depending Who's Asked, State Tax Caps Will Cost Or Save $600 Million This Year

Jim Nix

The latest numbers given to a study committee of Indiana lawmakers say the state’s property tax caps are worth about $600 million – either for taxpayers or for the state’s coffers.

But the analysis also shows urban areas have been disproportionately hit by the effects of the decreased revenue – despite the fact the tax caps were enacted after residents in some cities, particularly Indianapolis, complained their taxes were rising too quickly.

As members of the Indiana General Assembly spoke openly about the fact they were tired of, in their words, being blamed for local tax increase, they allocated some additional authority to local taxing units. But many of those same units still say they still need additional leeway to recoup all the cash they’ve lost in the last six years.

State Sen. Brandt Hershman (R-Buck Creek), who chairs the Senate Tax and Fiscal Policy Committee, says one effect has been that only some local taxing units can increase their levy, leaving others unable to raise more money.

"One local unit, whether it be a city, a town or a school, who tried to enhance their revenue, does so at the expense of other units," Hershman says. "Is that fair? Is that reasonable? I think not and I think we need more data here to understand exactly what those impacts have been."

The legislature does allow some units, such as school corporations, to call for a referendum of the voters to help decide if they’ll be able to exceed their statutory ability to raise money. Only about half of school referenda proposed since the tax caps have passed, however.