Top Twenty Reasons to support the Constitutional Amendment

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Voters statewide will vote November 2, 2010, on the following public question to (1) make the 1% - 2% - 3% property tax caps permanent and (2) protect homestead property tax deductions from legal challenge:

PUBLIC QUESTION #1

SHALL PROPERTY TAXES BE LIMITED FOR ALL CLASSES OF PROPERTY by amending the Constitution of the State of Indiana to do the following:

    (1) limit a taxpayer's annual property tax bill to the following percentages of gross assessed value:
        (A) 1% for an owner-occupied primary residence (homestead);
        (B) 2% for residential property, other than an owner-occupied primary residence, including apartments;
        (C) 2% for agricultural land;
        (D) 3% for other real property; and
        (E) 3% for personal property.

The above percentages exclude any property taxes imposed after being approved by the voters in a referendum.

(2) Specify that the General Assembly may grant a property tax exemption in the form of a deduction or credit and exempt a mobile home used as a primary residence to the same extent as real property?

The complete text and digest explanation of the constitutional amendment referenced by the public question can be found at http://www.finplaneducation.net/property_tax_caps.htm.

Listed next are the top twenty reasons for working families to support the Constitutional Amendment.

1. Property tax relief will not disappear.

A recent example of how property tax relief CAN disappear is the 20% statewide sales tax increase that was imposed by Indiana's General Assembly effective December 1, 2002. Hoosiers were told by their General Assembly public servants that the sales tax increase from 5% to 6% would be used to lower homeowner property taxes by an average of 16.3%. Starting in 2003 and continuing through 2007, seventeen legislative and administrative actions taken by the Governor and General Assembly, together with increased local government spending, decreased the promised 16.3% homeowner property tax relief to just 2.4%. Details of this disappearing property tax relief can be found at http://finplaneducation.net/betrayal_incompetence.htm.

The General Assembly once again increased the statewide sales tax from 6% to 7% on April 1, 2008, to pay for another round of property tax relief. This latest property tax relief is based on the following legislative changes in the 2008 property tax relief bill: property tax caps based on assessed value, required referenda before the caps can be bypassed, $45,000 standard deduction from homestead assessments, 35% supplemental deduction from most homestead assessments, seniors homestead deduction, state assumption of seven property tax levies, local option income taxes for property tax levy replacement and relief, unelected governing body budgets approval. Full details regarding the 67 provisions in the 2008 property tax relief bill enacted by the General Assembly can be found at http://www.finplaneducation.net/2008_property_tax.htm.

According to the December 1, 2009, Property Tax Impact Report from the Indiana Legislative Services Agency, Pay 2010 statewide homeowner net property taxes are $457,381,142 (or 20.7%) lower than Pay 2007 property taxes. Of the $457.4 million decrease in homeowner property taxes, $110.9 million comes from the 1% property tax cap and the remaining $346.5 million comes from the other provisions in the 2008 property tax relief bill (primarily the 35% supplemental deduction and the state assumption of tax levies).

According to the 2009 Indiana Handbook of Taxes, Revenue, and Appropriations, the Pay 2007 residential and agricultural homestead net property tax levy was $2,079,168,461 and net assessed value was $133,556,884,478. This means that in 2007 the average homeowner had a property tax burden that was 1.6% of assessed value.

Listed next is the January 5, 2010, Department of Local Government Finance data for both Pay 2007 and Pay 2009 where the homestead tax bill amounts are compared to their gross assessed values. The Pay 2007 data had all counties reporting and the Pay 2009 data had all counties reporting except Brown, Clinton, LaPorte, Porter, and White.

Pay 2007 = 1,671,482 Homesteads (100.0%)
From 0.00% Thru 0.25% = 12,939 Homesteads (0.8%)
From 0.26% Thru 0.50% = 57,322 Homesteads (3.4%)
From 0.51% Thru 0.75% = 231,488 Homesteads (13.8%)
From 0.76% Thru 1.00% = 431,268 Homesteads (25.8%)
From 1.01% Thru 1.25% = 436,599 Homesteads (26.1%)
From 1.26% Thru 1.50% = 266,668 Homesteads (16.0%)
Greater Than 1.50% = 235,198 (14.1%)

Pay 2009 = 1,670,215 Homesteads (100.0%)
From 0.00% Thru 0.25% = 151,436 Homesteads (9.1%)
From 0.26% Thru 0.50% = 309,301 Homesteads (18.5%)
From 0.51% Thru 0.75% = 489,916 Homesteads (29.3%)
From 0.76% Thru 1.00% = 419,149 Homesteads (25.1%)
From 1.01% Thru 1.25% = 194,138 Homesteads (11.6%)
From 1.26% Thru 1.50% = 72,288 Homesteads (4.3%)
Greater Than 1.50% = 33,987 (2.0%)

For the Pay 2007 property tax year, 56.2% of homesteads had a property tax bill that was greater than 1% of gross assessed value. Only 17.9% of homesteads had a Pay 2009 property tax burden that was greater than 1% of gross assessed value. The reasons for this decrease were the non-cap provisions in the 2008 property tax relief bill (primarily the 35% supplemental deduction and the state assumption of tax levies).

Some opponents of the constitutional amendment contend that the 1% homestead property tax cap will protect so few homeowners from property tax increases that taking the "drastic" step of amending the state constitution makes no sense. The opponents are off base because the constitutional amendment will permanently protect 56.2% of homeowners from again having a future property tax burden that is greater than 1% of gross assessed value, much less returning to the 2007 burden that was 1.6% of gross assessed value. The 1% cap also provides predictability and assurance that property taxes do not become an unaffordable burden to homeowners whose net tax is currently both above and below the 1% gross assessed value cutoff. OF COURSE, working families will need to be ever vigilant to sustain the supplemental homestead deduction and state-assumed levies against erosion by single-interest property tax spenders and the Distressed Unit Appeals Board.

Taxpayers other than homeowners also have their Pay 2010 net property tax lowered. Commercial apartments pay 21.9% less than in 2007, while other residential (1 to 3 units) pays 16.7% less. Payers of personal property tax enjoy a 9.5% reduction. Agricultural property taxes increased due to a 42.0% hike in the base rate of farmland from $880 per acre to $1,250 per acre, although the school general fund levy assumed by the state helped to limit the increase to 15.9%.

Largely because of General Assembly actions to accommodate single-interest property tax spenders, the promised homeowner property tax relief in 2003 had just about completely disappeared in 2007. The current property tax relief can also quickly disappear because every one of the provisions in the 2008 property tax relief bill is subject to erosion by the General Assembly and the operations of the Distressed Unit Appeals Board. The 1% homeowner property tax cap in the 2008 property tax relief bill is such an important protection against disappearing homeowner property tax relief that it is included as part of the constitutional amendment.

2. The current legislative-only property tax caps will not disappear.

Indiana General Assembly efforts to establish property tax caps have a short history.

a. House Bill 1001, signed by the governor on March 24, 2006, established a property tax cap on homesteads, apartment complexes, and other residential rental property equal to 2% of the assessed value beginning in 2007 for Lake County and 2008 for all other counties. The 2% cap was to be extended to all other real and personal property in 2010.

b. House Bill 1478, signed by the governor on May 11, 2007, virtually eliminated the property tax relief that the caps passed in 2006 were supposed to provide. The disappearing property tax relief came about because of the provisions listed next. (a) School general funds were exempted from the property tax caps - a school corporation’s local tuition support property tax levy could not be reduced because of revenue lost to the caps. (b) Redevelopment commissions and TIF governing bodies could exclude TIF replacement levies from the property tax caps. (c) The 2% cap would apply only to homesteads, instead of all residential property, in 2008 and 2009. (d) The cap that begins in 2010 for all other real and personal property increases to 3% from 2%. (e) A petition for relief (that would increase property tax bills in excess of the caps) could be submitted to the Circuit Breaker Appeal Board if a taxing unit loses at least 2% of annual property tax revenue to the caps.

c. House Bill 1001, signed by the governor on March 19, 2008, replaced all prior property tax caps with the following caps on gross assessed value beginning in 2010: (a) 1% on homestead property; (b) 2% on other residential property (residential rentals, apartments, mobile home land, long term care facilities); (c) 2% on agricultural land; (d) 3% on other real property; (e) 3% on personal property. For 2009, these caps are phased in at 1.5% - 2.5% - 3.5%.

It is alarming how quickly the 2% property tax cap established in 2006 was pretty much wiped out by legislative betrayal the very next year! The 1% - 2% - 3% caps enacted by the General Assembly in 2008 must be enshrined in the state constitution to protect them from legislative repeal and legal challenge.

If the November 2, 2010, Constitutional Amendment referendum passes, the 1% - 2% - 3% property tax caps will become a permanent part of the Indiana Constitution where they cannot be changed by the General Assembly or court challenge.

3. The property tax caps will be able to withstand legal challenge.

The 1% - 2% - 3% legislative property tax caps caps in the 2008 property tax reform program are blatantly unconstitutional because they conflict with the "uniform and equal rate of property assessment and taxation" requirement in Article 10 Section 1 of the Indiana Constitution.

If the Constitutional Amendment does not pass on November 2, property tax cap opponents are poised to successfully sue to overturn the legislative-only caps. If the caps are eliminated by court action, the same legal reasoning will also lead to the removal of all homeowner property tax deductions. Even though the General Assembly has properly decided that the caps and homestead deductions are good public policy, they will disappear if Public Question #1 is defeated at the polls.

The Constitutional Amendment must be passed to not only make the property tax caps permanent, but to also prevent a homeowner property tax explosion by protecting homeowner property tax deductions from legal challenge.

4. Property tax deductions and credits will be protected from legal challenge.

There will be a property tax explosion if the Constitutional Amendment does NOT pass. The consequences of voting NO on Public Question #1 are listed next.

a. Uncertainty will be created because the General Assembly will have free reign to continuously tinker with the property tax caps.

b. The business community will successfully sue to have the current legislative-only caps declared unconstitutional to keep an ever-increasing share of the property tax burden from being shifted to them. (Any other interested entity or constitutional activist could likewise successfully sue to overturn the caps.)

c. The "uniform and equal rate of property assessment and taxation" constitutional clause that will allow the courts to overturn the legislative-only property tax caps will also ELIMINATE the following homeowner property tax deductions that shift property taxes away from homeowners: $45,000 homestead standard, 35% supplemental standard, mortgage, 65 or over, blind or disabled, partially disabled veteran - service connected, disabled veteran, rehabilitation, solar energy, wind-powered devices, hydro-electric power device, geothermal energy.

d. Court elimination of the homestead standard deduction and supplemental standard deduction will cause homeowner property taxes to skyrocket.

e. The court-ordered property tax turmoil will devastate the Indiana housing market.

Part (b) of the Constitutional Amendment reads:

(b) A provision of this section permitting the General Assembly to exempt property from taxation also permits the General Assembly to exercise its legislative power to enact property tax deductions and credits for the property. The General Assembly may impose reasonable filing requirements for an exemption, deduction, or credit.

Parts (c) and (d) of the Constitutional Amendment list what classes of property the General Assembly is permitted to exempt from taxation:

(c) The General Assembly may exempt from property taxation any property in any of the following classes:
     (1) Property being used for municipal, educational, literary, scientific, religious, or charitable purposes.
     (2) Tangible personal property other than property being held as an investment.
     (3) Intangible personal property.
     (4) Tangible ~~real~~ property, including curtilage, used as a principal place of residence by an:
          (A) owner of the property;
          (B) individual who is buying the tangible ~~real~~ property under a contract; or
          (C) individual who has a beneficial interest in the owner of the tangible ~~real~~ property.
~~(b)~~ (d) The General Assembly may exempt any motor vehicles, mobile homes (not otherwise exempt under this section), airplanes, boats, trailers, or similar property, provided that an excise tax in lieu of the property tax is substituted therefor.

Because part (c) (2) permits the General Assembly to exempt from taxation tangible personal property other than property being held as an investment, the Constitutional Amendment permits the General Assembly to enact property tax deductions and credits for most tangible personal property including manufacturing equipment, construction equipment, and farm equipment. The Constitutional Amendment gives the business and farm communities new possibilities for property tax reduction.

Because part (c) (4) permits the General Assembly to exempt principal places of residence from taxation, the crucially important homeowner property tax deductions become constitutional.

The Constitutional Amendment needs to be approved by statewide referendum to not only make the 1% - 2% - 3% property tax caps permanent, but to also prevent a homeowner property tax explosion by protecting homeowner property tax deductions from legal challenge. The amendment will also permit the General Assembly, if it decides it is good public policy, to enact property tax deductions and credits for manufacturing equipment, construction equipment, and farm equipment.

5. Property tax caps are better than the prior property tax replacement credits.

Some opponents of the constitutional amendment contend that the 1% homestead property tax cap will create winners and losers.

The opponents correctly point out, for example, that a rural homeowner with a $100,000 home whose total property tax burden is below the 1% cap will pay proportionally more property tax for the same county general fund services than will the urban homeowner with a $100,000 home whose total property tax burden is above the 1% cap. This perceived "imperfection" is supposedly so bad that taking the "drastic" step of amending the state constitution makes no sense. The opponents are off base because they choose to ignore the unfair property tax scheme that was in place before the property tax caps were implemented.

The prior property tax scheme used property tax replacement credits that were distributed based on property tax levy amounts - a government unit with a higher property tax levy received more PTRC than a government unit with a lower property tax levy. The rural homeowner in the preceding example received less PTRC on his property tax bill than did the urban homeowner. The SAME type of wiinner and loser imperfection existed under the old PTRC scheme as it does under the current property tax caps.

From a Taxpayer Friendly standpoint, the current property tax caps are preferred to the prior PTRC scheme. PTRC payments rewarded increased government spending - a government unit that increased its property tax levy received more PTRC than a government unit that reduced its property tax levy. Conversely, property tax caps encourage efficient government.

If local government units impose a property tax burden that exceeds the caps, the government units receive less revenue and must find a way to deliver services more efficiently. As a last resort, the government units can resort to income tax increases - homeowners benefit by moving away from property taxes toward a tax burden that is based on the ability to pay.

Property tax caps may be imperfect, but they are better than the prior PTRC scheme because they encourage efficient government rather than reward increased government spending. This Taxpayer Friendly improvement is yet another good reason to support the constitutional amendment.

6. Farmers will be helped.

The 2008 property tax reform program passed by the Indiana General Assembly included not only the property tax caps, but also removed the following tax levies from local property tax bills: School General Fund, Special Education Preschool, Child Welfare, State Fair and State Forestry, Juvenile Incarceration, Hospital Care for the Indigent, Pre-1977 Local Police and Fire Pension. These seven removed local property tax levies were assumed by the state and paid for with sales tax revenues, including the 2008 statewide sales tax increase from 6% to 7%.

According to the December 1, 2009, Property Tax Impact Report from the Legislative Services Agency, the statewide net property tax on agricultural business real property (including farmland) increased 15.9% from $311.7 million in 2007 to $361.3 million in 2010. This brings up the question, has the 2008 property tax reform program really helped farmers? The resounding answer is YES!

Farmland assessed value increased 42.0% from $880 per acre in 2007 to $1,250 in 2010. However, the property tax bill on agricultural business real property only increased 15.9% because of the levies removed from the 2010 property tax bill by the 2008 property tax reform program.

Where do the sales tax revenues come from that the state uses to assume the levies that lower the property tax burden of farmers? Individuals pay 85% of the sales tax collected by the state. Farmers benefit from sales tax exemptions on the sale of goods and utilities directly used in farming. The fact that individuals pay most of the state's sales taxes while farm businesses are largely exempt from sales taxes helps explain the differences between the 1% homeowner property tax cap and the 2% cap on farmland and 3% cap on farm business operations.

The 2008 property tax reform program also helps farmers in the five additional ways listed next.

1. Like other homesteads, farm homes and the acre of land they sit on have their property tax cap lowered to 1% of their fair market value from 2%.

2. Because farmland uses less of the municipal services normally paid for by property taxes, the cap for farmland is lowered to 2% from 3%.

3. The remainder of farm business property taxes are capped at 3%, thereby creating a predictable maximum property tax burden. Average farm business property taxes will continue to be well below the 3% cap for the foreseeable future because the 2008 property tax reform program does not allow any property tax revenue shortfalls resulting from property tax caps to be shifted to taxpayer classes that have not reached their cap level. In other words, property tax revenue shortfalls that result from the 1% homeowner property tax cap cannot be shifted to farmers and must be absorbed by local government units in the form of reduced spending.

4. Like other Indiana businesses, Indiana farmers will continue to benefit from an accelerated depreciation schedule where farm equipment is fully depreciated within five years to 30 percent of its cost.

5. The 2005 agreement with the farm community continues where an assessment mechanism for farmland is implemented that, instead of using the fair market value required of all other real property owners, uses a market value in use approach based on changes in cash rent, yields, production costs, market prices, and interest rates. Starting with the Pay 2008 property tax year and continuing through 2010, farmland assessment calculations were based on a rolling six-year average calculated by dividing the net income of each acre by the appropriate capitalization rate. For example, the change in the farmland assessed value for the Pay 2010 property tax year was the result of the removal of the 2000 data and the addition of the 2006 data. The Pay 2007 farmland assessed value was arbitrarily frozen by the General Assembly at $880 per acre, while the subsequent calculated assessed values were $1,140 for Pay 2008, $1,200 for Pay 2009, and $1,250 for Pay 2010.

An acre of farmland typically appraises at a fair market value of $4,200, and an acre of farmland in Hamilton County sells for up to $40,000. Under the market value in use assessment mechanism with a 2% cap, farmers' property taxes will average 40 percent lower than if their farmlands were assessed at the fair market value and capped at 1%.

Watchdog Indiana supported Senate Bill 396 passed by the General Assembly in 2010 where the Department of Local Government Finance is required (beginning with property taxes payable in 2011) to use an adjusted six-year average that eliminates the highest value to calculate the base rate for the assessment of farmland. The base value per acre of farmland will be lowered from $1,400 to $1,290 in 2011, from $1,700 to $1,500 in 2012, and from $1,810 to $1,620 in 2013. These reductions in the farmland base rate will decrease the 2011, 2012, and 2013 net property tax from farmland by $75.1 million, or about 8.0%.

The Constitutional Amendment has an added benefit for farmers in that it makes it possible for the General Assembly to implement property tax credits or deductions on the value of tangible personal property (which includes farm equipment). The Constitutional Amendment provisions make any future credits and deductions on the value of farm equipment immune to constitutional challenge.

The American taxpayer has been generous to farmers with various subsidies. Hoosier farmers should not begrudge the protection given to other Hoosier working families by the Constitutional Amendment. Farmers are helped by the 2008 property tax reform program and should accordingly support the Constitutional Amendment.

7. There will be a more fair and affordable working family tax burden.

There are those who point out that the 2008 property tax reform program, of which constitutional property tax caps are a part, will result in SOME Hoosiers paying more in statewide sales tax and local income tax increases than they receive in property tax relief. For those attuned to political reality, the proper response is "So what?" The terrible tax genie is out of the bottle – no informed citizen can envision a realistic circumstance where the 2008 statewide sales tax increase will be rescinded. If local income taxes go up to replace property taxes or replace the revenue lost to property tax caps, the tax burden is properly shifted away from property taxes to income taxes – from a tax NOT based on the ability to pay to a tax that IS based on the ability to pay.

Constitutional property tax caps are like an "insurance policy" that protects working families from the possible future excesses of local government. Many local governments have been taken over by developer-first interests where tax-increasing TIFs, nonsensical municipal annexations, and so-called development initiatives funded by taxpayers are forcing property tax burdens ever higher. If push comes to shove, folks can change their buying habits to lessen their sales tax burden and use the property tax caps in the Constitutional Amendment to protect their home from the Taxpayer Unfriendly actions of local elected officials.

It is true that some municipalities in 21 counties may need to impose a local option income tax to maintain essential services. The caps cannot reasonably be expected to reduce the spending of some local governments by more than five percent. However, the Constitutional Amendment caps will make the property tax burden more predictable and the overall tax burden more fair and affordable. Fewer Hoosiers will have to choose between nutritious meals, needed medications, and keeping their home. Many working families may be one job loss, one on-the-job injury, or one illness away from needing permanently capped property taxes.

8. Homeowner property taxes will not leap up.

Some constitutional amendment opponents erroneously claim that the constitutional caps are useless because property tax relief depends on poorly controlled property tax assessments. Future homeowner reassessments will NOT continue to increase at the rate of recent years because ANNUAL market value trending will take the place of reassessments that covered several years at a time. In spite of currently declining home values, homeowner property tax assessments will likely CREEP UP over time, but these modest assessment increases BY THEMSELVES are NOT expected to cause homeowner property taxes to LEAP UP. Indeed, the constitutional amendment will KEEP homeowner property taxes from leaping up. Of course, it cannot be denied that effective legislative action to improve the assessment process, limit annual assessment increases, and establish a more sensible homestead definition would be MOST welcome.

9. Businesses will be helped.

The constitutional amendment is good for business. The property tax cap for all residential rentals, commercial apartments, mobile home land, and long term care facilities is lowered from 3% to 2% of their value. The existing commercial and industrial property tax cap of 3% will never be increased, thereby enabling businesses to accurately predict their property taxes so they do not become an unaffordable burden.

According to the December 1, 2009, Property Tax Impact Report from the Indiana Legislative Services Agency, the 2010 net property tax for residential rentals (1 to 3 units) is 16.7% less than 2007. Of the $157.0 million savings, $153.5 million comes from the 2% property tax cap.

The 2010 net property tax for commercial apartments (4 or more units) is 21.9% less than 2007. Of the $66.3 million savings, $58.1 million comes from the 2% property tax cap.

The 2010 net property tax for commercial, industrial, mobile home land, and long term care facilities is 6.8% more than 2007. However, this increase (which primarily results from the 35% supplemental homestead deduction) will be more if not for the $86.0 million savings from the property tax caps. Also, a significant portion of the increase is offset by a 9.5% decrease in personal property taxes.

A new study from Ball State University concludes that property tax caps should boost Indiana's economy over the next few years by increasing homeowner's disposable income and lowering costs for businesses: see
http://www.bsu.edu/news/article/0,1370,7273-850-63756,00.html.

In addition, the constitutional amendment will permit the General Assembly, if it decides it is good public policy, to enact property tax deductions and credits for most personal property including manufacturing equipment, construction equipment, and farm equipment.

10. Property tax revenue shortfalls resulting from property tax caps cannot be shifted to taxpayer classes that have not reached their cap limit.

When the caps are reached by one or more classes of property taxpayers in a local taxing unit, the taxing unit experiences a property tax levy shortfall. The property tax revenue shortfall generated by the property tax caps cannot be shifted to other taxpayer classes that have not reached their cap threshold. The property tax increase of a taxpayer who has not reached its cap threshold is limited by the 6-year rolling average growth in non-farm income.

11. Reliable information is available to predict the effects of property tax caps.

The state's non-partisan Legislative Services Agency has issued the following reports that detail the effects of the 2008 property tax relief bill (including the 1% - 2% - 3% property tax caps) on all taxpayer classes and taxing units:

a. December 2009 County Property Tax Changes (2007-2009 for 85 counties reporting as of November 2009),

b. December 2009 Circuit Breaker Report (2009-2011),

c. December 2009 Property Tax Impact Report (2007-2011).

12. The effect of property tax caps on K-12 school spending is manageable.

The effect of 2011 property tax caps on the total expenditures of Indiana's K-12 public school systems will be manageable. Of the 293 K-12 Indiana public school systems, 271 school systems will experience a 2011 property tax caps revenue decline that is 2.0% or less of their 2009 grand total expenditures. IF the 1% - 2% - 3% property tax caps and homeowner property tax deductions are reliably protected through passage of the Constitutional Amendment on November 2, 2010, it MIGHT make sense to working families to approve a local referendum for a 7-year property tax increase to provide additional tuition support in 22 school systems.

13. Property tax caps will have NO significant impact on essential service delivery by the great majority of Indiana's cities and towns.

The great majority of Indiana's 565 cities and towns - 484 or 85.7% -will have their budgeted funds that include property tax levies impacted 5.0% or less by the 2010 caps. Of Indiana's 92 counties, 21 counties MAY need to consider a local option income tax in lieu of finding less expensive ways to maintain essential municipal services.

14. The Distressed Unit Appeals Board will not have unlimited ability to increase property taxes.

The Distressed Unit Appeals Board is a ticking property tax bomb. The bureaucrat and single interest dominated Appeals Board has the power to increase the property taxes of a distressed unit beyond the legislative 1% - 2% - 3% property tax caps. The constitutional amendment will make unconstitutional any Appeals Board decision that increases a political subdivision's property tax beyond the promised cap levels. Without the constitutional amendment, there is no limit as to how much the Appeals Board can ultimately increase property taxes.

15. The referendum process can be used to help fund the essential needs of schools and municipalities.

If local taxpayers are concerned about the effects of property tax caps on their local school system, current law allows them to increase their property taxes by voting for a 7-year referendum tax levy.

Schools, as well as all other political subdivisions, can also have their capital projects approved by referendum.

A capital project is a controlled project if it will cost the political subdivision more than the lesser of $2 million or an amount equal to 1% of the total gross assessed value of property within the political subdivision on the last assessment date (if that amount is at least $1 million). A project that is in response to a natural disaster, emergency, or accident that makes a building or facility unavailable for its intended use and that is approved by the county council is not a controlled project for purposes of the referendum process.

A controlled project for a school building for kindergarten through Grade 8 is subject to a referendum if the cost is more than $10 million. A controlled project for a school building for Grade 9 through Grade 12 is subject to a referendum if the cost is more than $20 million.

Other controlled projects with a cost that exceeds the lesser of $12 million or 1% of assessed value (but at least $1 million) are also subject to a referendum.

Controlled projects that are not subject to a referendum are subject to the petition and remonstrance process.

Any 7-year school referendum tax levy and any capital project approved by voters will increase local property taxes. The Constitutional Amendment exempts all property taxes approved by referendum from the property tax cap limitations.

16. All classes of property owners benefit regardless of income level.

Some opponents contend that the Constitutional Amendment should not be supported because the property tax caps primarily benefit the wealthy. This assertion can be analyzed from two vantage points.

(1) How do the property tax caps operate for homeowners whose primary residences have different assessed values?

(2) How do the property tax caps operate for different classes of property owners?

The bottom line to Question #1 is that higher-value homeowners realize more in property tax cap savings than do lower-value homeowners, but higher-value homeowners in most localities still pay proportionally more in property taxes than do lower-value homeowners. This bottom line is reached because of the homestead deductions that homeowners have purchased with their sales tax increases. The standard homestead deduction is the lesser of $45,000 or 60% of a home's gross assessed value. The supplemental homestead deduction (after subtracting the standard deduction) is 35% of the first $600,000 of net assessed value plus 25% of any net assessed value that exceeds $600,000.

UNLESS Other Residential and Commercial Apartments property is deemed to have "wealthy" owners, the bottom line to Question #2 is that the operation of property tax caps for different classes of property owners does NOT benefit the wealthy. Wealthy property owners do NOT receive more in Property Tax Cap Circuit Breaker Credits compared to the Net Property Tax they pay.

In conclusion, the Constitutional Amendment should be passed because the 1%-2%-3% property tax caps are just as important to lower-value homeowners as to other classes of property owners. Even though the property tax burden of many lower-value homeowners is less than the 1% homeowner property tax cap because of the homestead deductions, the cap serves as an important "insurance policy" that provides a generally affordable and predictable maximum property tax burden. A lower-value homeowner can use the 1% cap together with the sales tax exceptions to plan their property and sales tax burdens so they do not have to make terrible choices between nutritious foods, life-enhancing medications, and losing their home.

17. The homeowner caps for Lake and St. Joseph counties will be 1% of assessed value before long.

We must not let the pursuit of perfection be the enemy of what is good. Some disingenuously assert that the constitutional amendment should be defeated because Lake and St. Joseph counties will start with different caps. Instead of starting at 1%, the homeowner caps for Lake and St. Joseph counties will effectively be 1.88% and 1.52% respectively until they become 1% in 2020.

Even though the beginning homeowner caps are higher in Lake and St. Joseph counties, the 2008 property tax relief bill still provides a 2010 net property tax reduction (when compared to 2007) of 16.4% for the typical Lake County working family and 26.7% for the typical St. Joseph County working family.

If it chooses to do so, the General Assembly can lower the homeowner caps for Lake and St. Joseph counties PRIOR to 2020.

18. Property taxes can be controlled below the cap levels.

The constitutional amendment does NOT set farm land property taxes at twice the homestead level and business property taxes at three times the homestead level. The caps merely limit the maximum property tax burden for classes of property tax payers. The General Assembly can use the property tax deductions and credits allowed by the constitutional amendment, as well as other legislative action, to provide property tax relief well below the cap level for any class of property tax payer.

19. Indiana is NOT like California.

Constitutional amendment opponents are trying to make the case that Proposition 13, which passed on June 6, 1978, is somehow responsible for the current budget deficit woes of California’s government units. There is research on all sides of Proposition 13 where you can find strong support both for and against constitutional property tax caps. The fact of the matter is that Indiana is not at all like California – California has sustained government overspending by relying on overly-optimistic revenue projections, while Indiana’s government units have done a pretty good job of adjusting and living within their revenue means. It is nonsense to look at California’s budget woes as a reason to oppose our constitutional amendment.

20. Strong support for the Constitutional Amendment will let the General Assembly know that working families expect their property tax protections to be maintained.

Voters, who are predominantly property tax payers, have the opportunity to decisively express their collective wisdom at the polls on November 2, 2010, in favor of the constitutional amendment property tax protections without the undue interference of those property tax spenders who exert so much influence inside our Statehouse. The Statehouse property tax spenders have used their influence over the years to whittle away homeowner property tax relief. If the constitutional amendment passes by a wide margin, our General Assembly public servants will get the clear message that we expect them to defy the property tax spenders and maintain ALL our property tax protections - especially the $45,000 homestead standard deduction and the 35% homestead supplemental deduction. If the constitutional amendment FAILS to pass, the property tax spenders will have the upper hand and the recent homeowner property tax relief will rapidly disappear.

This page was last updated on 03/31/13.