State considers tax caps amendment

The Indiana House of Representatives is considering a bill that would amend Indiana’s Constitution, making the state’s system of classified property tax caps permanent.

The State Senate passed a joint resolution Feb. 9 that the House is now considering. If the House agrees, Hoosier voters will have final say on the proposed amendment.  

The bill can only pass the House if Speaker Patrick Bauer, D-South Bend, agrees to hear it.

Supporters in the Senate promised to make the tax caps permanent to ensure relief for Indiana taxpayers, and the only way to do that is through an amendment because the current state Constitution calls for all property types to be taxed equally.

Critics say the amendment is unnecessary and will make it extremely difficult to alter or repeal the caps in the future. Property taxes are a primary source of revenue for local governments in Indiana.

Last session, the Indiana General Assembly put in place a 1 percent to 2 percent to 3 percent classified property tax system, which calls for taxes on households and family residences to be capped at 1 percent of their assessed market value. Owners of agricultural land and rental properties pay 2 percent, and businesses pay 3 percent.

“I am opposed to putting the property tax caps into the Constitution because this is an issue that can and should be addressed within statute,” said State Senator Vi Simpson, D-Bloomington. “The caps are in effect now under existing state law and do not require a constitutional amendment. Additionally, we do not have enough information on the impact of the property tax caps and whether these are the best levels to accomplish what we need.” 

Other opponents, like the Greater Bloomington Chamber of Commerce, agree that the resolution’s passage is a “premature move,” said Morgan Hutton, the Chamber’s advocacy initiatives coordinator. The Chamber is also concerned that the classified system could hurt businesses.

“The Indiana Constitution currently states that property will be taxed equally, and under this measure businesses bear a larger tax burden,” Hutton said.

But supporters say the tax caps actually benefit businesses. Since the rates cannot increase, property taxes become a predictable and affordable expense. State Sen. Richard Bray, R-Martinsville, said without the caps, businesses and farmers would probably end up paying more taxes.

Opponents say they aren’t opposed to the caps themselves, just the amendment.
“The Chamber does not have a problem with a tax cap,” Hutton said. “In fact, capping is probably a good thing, but it is opposed to a constitutional amendment that makes the classified tax cap permanent.”

If such an amendment passes, the tax caps could only be changed through another amendment.

Bray said the taxing system has provided relief to taxpayers since it was put in place, and he wants it to stay that way.

“It’s not perfect, but it’s better than the alternatives,” Bray said. “I think we should pass it.”