Homestead Deductions Threat

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The Chairman of the Indiana House Ways and Means Committee allowed Amendment #13 for Indiana Senate Bill 494 to be introduced and debated by the Committee members (without public comment) on March 28, 2013, from 1:43 PM to 2:00 PM. Amendment #13 was then withdrawn without a vote. It is not likely that Amendment #13 will be offered as a second reading amendment to a General Assembly bill this session because there has been no public debate regarding its significant impact on homestead property tax deductions.

Our Indiana Code provides for a homestead standard deduction that is the lesser of $45,000 or 60% of the gross assessed value of a principal place of residence. Amendment #13 would change the homestead standard deduction over the next five years until it becomes the lesser of $70,000 or 50% of the gross assessed value of a principal place of residence.

Our Indiana Code also provides for a homestead supplemental deduction that, after subtracting the $45,000 standard deduction, equals 35% of the first $600,000 of adjusted assessed value plus 25% of any adjusted assessed value that exceeds $600,000. Amendment #13 would change the homestead supplemental deduction over the next five years until it becomes, after subtracting the changed $70,000 standard deduction, 20% of the adjusted assessed value that exceeds $200,000.

If you wish to receive a copy of the Amendment #13 legal language, please send an Email to taxless3@comcast.net.

A fiscal impact analysis of Amendment #13 has not been made available to the public. Watchdog Indiana has estimated the impact of Amendment #13 by comparing the Actual Pay 2012 Boone County property taxes to how the Pay 2012 Boone County property taxes would have been different if Amendment #13 were fully implemented after being phased in over five years. The spreadsheet used to compare the Actual Pay 2012 Boone County property taxes to the Amended Pay 2012 Boone County property taxes is posted below.

Actual vs Amended Pay 2012 Boone County Property Taxes

(Compiled March 31, 2013)

Sources:

A. 2012 Boone County Property Tax Report at http://www.in.gov/legislative/pdf/BOONE12.pdf 

B. House Ways and Means Amendment #13 for 2013 Senate Bill 494 (available via Email request to taxless3@comcast.net)

Actual Pay 2012 Boone County Property Taxes

$74,537,797

Total Levy, All Units

$2,095,448,625

Homesteads NAV

$427,289,634

Other Residential NAV

$449,818,566

Ag Business/Land NAV

$991,085,655

Business Real/Personal NAV

$3,963,642,480

Total Net Assessed Value

Average Property Tax Rate = $74,537,797/$3,963,642,480 = $1.8805 per $100 of Net Assessed Value

$39,405,705

Homesteads Property Tax

$8,035,343

Other Residential Property Tax

$8,459,008

Ag Business/Land Property Tax

$18,637,741

Business Real/Personal Property Tax

$74,537,797

Total Levy, All Units

Net Assessed Value of a Median Value Boone County Home

Actual Pay 2012

$112,900

Gross Assessed Value

$45,000

Homestead Standard Deduction

$67,900

$23,765

Homestead Supplemental Deduction

$44,135

$3,000

Mortgage Deduction

$41,135

Net Assessed Value

Amended Pay 2012

$112,900

Gross Assessed Value

$56,450

Homestead Standard Deduction

$56,450

$3,000

Mortgage Deduction

$53,450

Net Assessed Value (29.94% more than Actual Pay 2012)

Amended Pay 2012 Boone County Property Taxes

$74,537,797

Total Levy, All Units

$2,722,825,943

Homesteads NAV (29.94% more than Actual Pay 2012)

$427,289,634

Other Residential NAV

$449,818,566

Ag Business/Land NAV

$991,085,655

Business Real/Personal NAV

$4,591,019,798

Total Net Assessed Value

Average Property Tax Rate = $74,537,797/$4,591,019,798 = $1.6236 per $100 of Net Assessed Value

$44,206,616

Homesteads Property Tax (12.18% more than Actual Pay 2012)

$6,937,288

Other Residential Property Tax (13.67% less than Actual Pay 2012)

$7,303,058

Ag Business/Land Property Tax (13.67% less than Actual Pay 2012)

$16,090,835

Business Real/Personal Property Tax (13.67% less than Actual Pay 2012)

$74,537,797

Total Levy, All Units

Actual vs Amended Pay 2012 Property Taxes for Selected Typical Boone County Homes

Gross Assessed Value

$75,000

$112,900

$200,000

$300,000

$400,000

$500,000

$600,000

$750,000

$1,000,000

Homestead Standard Ded.

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$45,000

$30,000

$67,900

$155,000

$255,000

$355,000

$455,000

$555,000

$705,000

$955,000

Homestead Supplemental

$10,500

$23,765

$54,250

$89,250

$124,250

$159,250

$194,250

$236,250

$298,750

$19,500

$44,135

$100,750

$165,750

$230,750

$295,750

$360,750

$468,750

$656,250

Mortgage Deduction

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

Net Assessed Value

$16,500

$41,135

$97,750

$162,750

$227,750

$292,750

$357,750

$465,750

$653,250

Property Tax Rate

$1.8805

$1.8805

$1.8805

$1.8805

$1.8805

$1.8805

$1.8805

$1.8805

$1.8805

Gross Property Tax

$310.28

$773.54

$1,838.19

$3,060.51

$4,282.84

$5,505.16

$6,727.49

$8,758.43

$12,284.37

1% Property Tax Cap

$750.00

$1,129.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$7,500.00

$10,000.00

Actual 2012 Property Tax

$310.28

$773.54

$1,838.19

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$7,500.00

$10,000.00

Property Tax Cap Savings

$0.00

$0.00

$0.00

$60.51

$282.84

$505.16

$727.49

$1,258.43

$2,284.37

Gross Assessed Value

$75,000

$112,900

$200,000

$300,000

$400,000

$500,000

$600,000

$750,000

$1,000,000

Homestead Standard Ded.

$37,500

$56,450

$70,000

$70,000

$70,000

$70,000

$70,000

$70,000

$70,000

$37,500

$56,450

$130,000

$230,000

$330,000

$430,000

$530,000

$680,000

$930,000

Homestead Supplemental

$0

$0

$0

$6,000

$26,000

$46,000

$66,000

$96,000

$146,000

$37,500

$56,450

$130,000

$224,000

$304,000

$384,000

$464,000

$584,000

$784,000

Mortgage Deduction

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

$3,000

Net Assessed Value

$34,500

$53,450

$127,000

$221,000

$301,000

$381,000

$461,000

$581,000

$781,000

Property Tax Rate

$1.6236

$1.6236

$1.6236

$1.6236

$1.6236

$1.6236

$1.6236

$1.6236

$1.6236

Gross Property Tax

$560.14

$867.81

$2,061.97

$3,588.16

$4,887.04

$6,185.92

$7,484.80

$9,433.12

$12,680.32

1% Property Tax Cap

$750.00

$1,129.00

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$7,500.00

$10,000.00

Amended 2012 Property Tax

$560.14

$867.81

$2,000.00

$3,000.00

$4,000.00

$5,000.00

$6,000.00

$7,500.00

$10,000.00

Property Tax Cap Savings

$0.00

$0.00

$61.97

$588.16

$887.04

$1,185.20

$1,484.80

$1,933.12

$2,680.32

Amended NAV Increase

109.09%

29.94%

29.92%

35.79%

32.16%

30.15%

28.86%

24.75%

19.56%

Amended Property Tax Increase

80.53%

12.19%

8.80%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Actual Pay 2012 Typical Boone County Home at the 1% Property Tax Cap

$272,800

Gross Assessed Value

$45,000

Homestead Standard Deduction

$227,800

$79,730

Homestead Supplemental Deduction

$148,070

$3,000

Mortgage Deduction

$145,070

Net Assessed Value

$1.8805

Property Tax Rate

$2,728.04

Gross Property Tax

$2,728.00

1% Property Tax Cap

$2,728.00

Actual 2012 Property Tax

$0.04

Property Tax Cap Savings

Amended Pay 2012 Typical Boone County Home at the 1% Property Tax Cap

$190,100

Gross Assessed Value

$70,000

Homestead Standard Deduction

$120,100

$0

Homestead Supplemental Deduction

$120,100

$3,000

Mortgage Deduction

$117,100

Net Assessed Value

$1.6236

Property Tax Rate

$1,901.24

Gross Property Tax

$1,901.00

1% Property Tax Cap

$1,901.00

Amended 2012 Property Tax

$0.24

Property Tax Cap Savings

Notes:

1. School referendum levies are not included.

2. There are no COIT and CEDIT homestead credits.

3. There are no LOIT property tax credits.

4. Average property tax rates are pre-circuit breaker (from property tax caps).

5. Assumed that increased amended circuit breaker losses from 1% cap are offset by amended property tax increases for homes below the cap.


Amendment #13 would increase the property tax burden of Residential and Agricultural Homesteads by 12.18%. The following property classes would pay 13.67% less in property taxes: Agricultural Business, Commercial, Commercial Apartments, Exempt Organizations, Industrial, Nonhomestead Residential, Utilities.

The property taxes on homes would be increased by Amendment #13 to the point where the 1% cap would be triggered by a gross assessed value of $190,100 instead $272,800. None of the property tax increase would be borne by homes with a gross assessed value above $272,800. Half of all homeowners would have a property tax increase more than 12.19% because the gross assessed value of a median value home is $112,900 and the annual property taxes on this home would increase $94.27 from $773.54 to $867.81. The annual property taxes on a $75,000 home would go up $249.86 (or 80.53%) from $310.28 to $560.14. Meanwhile, the annual property taxes on a home with a gross assessed value of $200,000 would go up only $161.81 (or 8.80%).

To reiterate the annual property tax increases that would result from Amendment #13: $249.86 (or 80.53%) on a $75,000 home versus $94.27 (or 12.19%) on a $112,900 home versus $161.81 (or 8.80%) on a $200,000 home versus NO property tax increase on a $272,800 home. Amendment #13 would disproportionally and dramatically increase the property taxes on the owners of lower value homes while the owners of higher value homes would have a lesser or no property tax increase. At the same time that the property taxes on a $75,000 home would increase 80.53%, the owner of a $272,800 residence with a vacation home “on the lake” would see no property tax increase on his residence and a 13.67% decrease in the property taxes on his nonhomestead vacation home. The Amendment #13 property tax increases on lower value homes would be particularly harmful to the working families of those 49% of our school children who receive free or reduced price lunches.

A comprehensive property tax relief bill was passed in 2008: see http://www.finplaneducation.net/2008_property_tax.htm. This bill used the past statewide sales tax increases (which began with an increase from 2% to 4% in 1973) that provided property tax replacement credits, and a new statewide sales tax increase from 6% to 7%, to provide property tax relief in the form of property tax caps, an increased homestead standard deduction, and the homestead supplemental deduction. The 2008 property tax relief bill also helped rental tenants by increasing the maximum renter’s income tax deduction from $2,500 to $3,000.

It is acceptable public policy that the property tax obligation on lower value homes is a smaller percentage of the gross assessed value than on higher value homes. The owners of higher value homes generally have higher incomes and are better able to afford their capped property taxes than the owners of lower value homes can afford to pay property tax increases. Also, lower income working families use a greater portion of their income than do higher income Hoosiers to bear the sales tax burden that pays for the property tax caps and homestead deductions: see “Indiana Sales Tax: A Nickel and a Penny” at http://www.finplaneducation.net/taxation_effects.htm.

Individuals pay 85% of the sales tax collected by the state. Unlike homeowners, businesses and farms benefit from numerous sales tax exemptions including wholesale sales, some business-to-business transactions, and some utility payments. It makes sense for homeowners who pay most of the sales tax taxes to benefit from the homestead deductions paid for by sales tax revenue.

Amendment #13 is a Taxpayer UNfriendly threat to our homestead deductions resulting from the improper influence of single interest groups within our state government. Hoosier working families have no army of lobbyists prowling our Statehouse hallways. We rely on Taxpayer Friendly State Representatives and State Senators to protect our interests. Unfortunately, only 20 of our 150 General Assembly public servants have pledged to maintain both our homestead standard deduction and our homestead supplemental deduction without ANY change: see below.

The following State Representatives have pledged to maintain both the Homestead Standard Deduction and the Homestead Supplemental Deduction without ANY change (4): Steve Davisson (Salem), Richard (Dick) Hamm (Richmond), Timothy Neese (Elkhart), John Price (Greenwood).

The following State Representatives have NOT pledged to maintain both the Homestead Standard Deduction and the Homestead Supplemental Deduction without ANY change (96): Lloyd Arnold (Leavenworth), Terri Jo Austin (Anderson), Ron Bacon (Chandler), James (Jim) Baird (Greencastle), John Bartlett (Indianapolis), Kreg Battles (Vincennes), B. Patrick Bauer (South Bend), Robert W. Behning (Indianapolis), Brian C. Bosma (Indianapolis), Steven Braun (Zionsville), Charlie Brown (Gary), Tim Brown (Crawfordsville), Woody Burton (Greenwood), Mara Candelaria Reardon (Munster), Martin Carbaugh (Fort Wayne), Robert W. (Bob) Cherry (Greenfield), Edward D. (Ed) Clere (New Albany), Suzanne Crouch (Evansville), Wes Culver (Goshen), Bill J. Davis (Portland), Edward O. DeLaney (Indianapolis), Tom Dermody (LaPorte), Dale R. DeVon (South Bend), Ryan M. Dvorak (South Bend), Sean R. Eberhart (Shelbyville), Sue E. Errington (Muncie), Dan Forestal (Indianapolis), William C. Friend (Macy), David N. Frizzell (Indianapolis), Randy Frye (Greensburg), Phil GiaQuinta (Fort Wayne), Terry Goodin (Crothersville), Douglas L. Gutwein (Francesville), Christina Hale (Indianapolis), Earl L. Harris (East Chicago), Bob Heaton (Terre Haute), Timothy P. Harman (Bourbon), Kathleen Heuer (Columbia City), Todd Huston (Fishers), Michael Karickhoff (Kokomo), Clyde Kersey (Terre Haute), Cindy Kirchhofer (Beech Grove), Sheila J. Klinker (Lafayette), Eric Allan Koch (Bedford), Rebecca Kubacki (Syracuse), Linda C. Lawson (Hammond), Don Lehe (Brookston), Matthew S. Lehman (Berne), Daniel J. (Dan) Leonard (Huntington), Jim Lucas (Seymour), L. Jack Lutz (Anderson), Karlee D. Macer (Indianapolis), Kevin A. Mahan (Hartford City), Peggy Mayfield (Martinsville), Jud McMillin (Brookville), Wendy M. McNamara (Mt. Vernon), Mark B. Messmer (Jasper), Justin Moed (Indianapolis), Bob Morris (Fort Wayne), Alan P. Morrison (Terre Haute), Charles "Chuck" Moseley (Portage), Sharon Negele Attica), Rick Niemeyer (Lowell), David L. Niezgodski (South Bend), David L. Ober (Albion), Scott D. Pelath (Michigan City), Matt Pierce (Bloomington), Phyllis J. Pond (New Haven), Gregory W. Porter (Indianapolis), Cherrish S. Pryor (Indianapolis), Rhonda J. Rhoads (Corydon), Kathy K. Richardson (Noblesville), Gail Riecken (Evansville), Thomas E. (Tom) Saunders (Lewisville), Robin Shackleford (Indianapolis), Harold (Hal) Slager (Schererville), Ben Smaltz (Auburn), Milo Smith (Columbus), Vernon G. Smith (Gary), Ed Soliday (Valparaiso), Mike Speedy (Indianapolis), Steven R. Stemler (Jeffersonville), Greg Steuerwald (Avon), Vanessa J. Summers (Indianapolis), Jeff Thompson (Lizton), Gerald R. (Jerry) Torr (Carmel), Randy Truitt (West Lafayette), P. Eric Turner (Marion), Matt Ubelhor (Bloomfield), Shelli VanDenburgh (Crown Point), Heath VanNatter (Kokomo), Thomas W. Washburne (Evansville), Timothy Wesco (Mishawaka), David A. Wolkins (Winona Lake), Dennis J. Zent (Uncertain), Cindy Meyer Ziemke (Batesville).

The following State Senators have pledged to maintain both the Homestead Standard Deduction and the Homestead Supplemental Deduction without ANY change (16): Ron Alting (Lafayette), Rodric D. Bray (Martinsville), Jim Buck (Kokomo), Michael R. (Mike) Crider (Greenfield), Mike Delph (Westfield), Doug Eckerty (Yorktown), Ron Grooms (Jeffersonville), Travis Holdman (Markle), Dennis K. Kruse (Auburn), Jim C. Smith (Charlestown), Brent E. Steele (Bedford), Jim Tomes (Wadesville), Brent Waltz (Greenwood), John M. Waterman (Shelburn), Thomas J. Wyss (Fort Wayne), R. Michael Young (Indianapolis),

The following State Senators have NOT pledged to maintain both the Homestead Standard Deduction and the Homestead Supplemental Deduction without ANY change (34): Jim Arnold (LaPorte), Jim Banks (Columbia City), Vaneta G. Becker (Evansville), Phillip L. (Phil) Boots (Crawfordsville), Jean Breaux (Indianapolis), John E. Broden (South Bend), Ed Charbonneau (Valparaiso), Susan Glick (LaGrange), Randall Head (Logansport), Brandt Hershman (Wheatfield), Lindel O. Hume (Princeton), Luke Kenley (Noblesville), Tim Lanane (Anderson), Sue Landske (Cedar Lake), Jean Leising (Oldenburg), David C. Long (Ft. Wayne), James W. Merritt, Jr. (Indianapolis), Patricia L. Miller (Indianapolis), Pete Miller (Avon), Ryan D. Mishler (Bremen), Frank Mrvan, Jr. (Hammond), Johnny Nugent (Lawrenceburg), Allen E. Paul (Richmond), Lonnie M. Randolph (East Chicago), Earline S. Rogers (Gary), Scott Schneider (Indianapolis), Timothy O. (Tim) Skinner (Terre Haute), Mark Stoops (Bloomington), Karen Tallian (Portage), Greg Taylor (Indianapolis), Greg Walker (Columbus), Carlin J. Yoder (Middlebury), Richard D. Young (Milltown), Joseph C. Zakas (Granger).

Please ACT NOW and contact your State Representative and State Senator and ask them if they pledge (or thank them if they have already pledged) to maintain both our homestead standard deduction and our homestead supplemental deduction without ANY change! The answer to this question is a good “litmus test” to determine if a General Assembly member will withstand the manipulations of single interest lobbyists and protect Hoosier working families from state and local tax increases during this time of slow recovery from the Great Recession. So their position on homestead deductions can be recorded, please send an Email to taxless3@comcast.net if your State Representative and State Senator respect you enough to answer your question about maintaining the homestead deductions. Information on how to identify and contact your State Representative can be found at http://www.finplaneducation.net/general_assembly_ratings.htm.

Watchdog Indiana Home Page General Assembly Property Tax Legislation Property Tax Caps Top Twenty Reasons to support Constitutional Property Tax Caps Property Tax Caps: How They Operate Property Tax Caps K-12 Schools Impact Property Tax Caps Municipal Impact Property Tax Caps: Referendum Implications 2008 House Bill 1001 Property Tax Assessment Issues Property Tax Betrayal & Incompetence Property Tax Replacement  Accurate Property Tax Math Property Tax Replacement Impact Homeowner Property Tax Effects Property Tax "Stories" 2008 Property Tax Legislation Testimonies Property Tax Deferral Program Legislative Voting Record

This page was last updated on 05/06/13 .