Unfortunately, when it comes to property tax reform, state legislators, local elected officials and the state administration are embarking upon a journey into uncharted territories. They need a map as to how to proceed.
Recently, I attended the "Black Sunday" rally held on the steps of Monument Circle and the Statehouse in Indianapolis. During the rally, I heard many shocking horror stories from Marion County residents. These stories were similar to others I had heard when the tax bills were mailed out in Vanderburgh County.
In the summer of 2004, several local elected officials joined members of the state Legislature in what was called a Property Tax Replacement Study Committee to examine the issue of property tax relief. Through the summer, I traveled to Indianapolis several times to monitor these discussions and once made personal remarks urging legislators to "first, do no harm" with respect to taxpayers at the local level. Unfortunately, after months of serious conversations, little in the way of substantive tax reform proposals came out of the committee.
This past year, the General Assembly apparently agonized over the property tax situation, seeing an across-the-board increase of some 24 percent for all taxpayers in the state. The 11th-hour solution of placing slot machines at two horse racing tracks in central Indiana hardly passes for serious tax policy.
This past April, my mother and I received a "Comparison of Levied Tax" statement from the Vanderburgh County treasurer's office for the home in which I reside. The report showed that under the new trending formula used for figuring property tax liability, our house has been reassessed at $110,200 from $84,300 the previous year. With the requisite changes in the tax rate, our total tax liability has grown from $595.44 in 2005 to $933.88 this year, a 56.8 percent increase. However, from what I heard at the rally, these increases are modest compared with what others have experienced.
According to the Vanderburgh County assessor's office, we are not alone in our concerns. More than 9,100 Vanderburgh County residents are appealing their new assessments under the new formula. Likewise, many people I have talked with have repeatedly stated that they believed the entire tax structure is way too complicated for the average person to comprehend. Many of my members are senior citizens on fixed incomes, and these enormous tax increases impose an unfair burden upon them when their home represents the largest tangible financial investment they own. Since we do not use means testing or an ability-to-pay standard with property taxes, the current tax policy seems exceedingly unfair to seniors and retirees.
Conversely, local elected officials are equally concerned about the constraints imposed upon them by state law, and they worry daily about future financial obligation with the inadequate revenue sources to finance local government. But they also deserve much of the blame — in recent years, the Evansville-Vanderburgh School Corp. and the city administration have spent and borrowed money as if there were no tomorrow, even to the extent of the school corporation borrowing tens of millions in tax anticipation warrants against future tax receipts just to pay the bills.
With this as a backdrop, the Vanderburgh County Taxpayers Association is asking Gov. Mitch Daniels to consider appointing a bipartisan blue ribbon commission — different from the one he created to study restructuring of local government — of business leaders, academics, representatives of organized labor and elected officials to revisit the topic of property tax reform for Indiana residents.
Similar in design and concept to the commission empanelled to study military base closures several years ago at the federal level, the goal of such a panel would be to come up with a menu of specific legislative options that could be considered by the General Assembly.
Why do we need such a panel? From past performance, it is obvious the General Assembly has become institutionally incapable of delivering real property tax reform in a manner that is fair and equitable.
During a typical session — surrounded by legions of lobbyists, attorneys, bond counsels, local elected officials — the leadership of both parties and individual members are constantly bending and adjusting various aspects of the tax code to benefit special interests.
With years of tinkering on the margins, they have created a monstrous revenue structure that delivers huge inequities and outmoded subsidies for the well connected at the expense of low- and moderate-income people. With the latest round of reassessments, they are now hitting upper-income people who have never experienced such exorbitant increases.
The increased taxes are also affecting the ability of people to sell their homes compared with similar properties in neighboring counties.
The long-term economic fallout of a revenue structure that places such a heavy burden upon homeowners, vis a vis other categories of taxpayers, should be obvious.
What must potential employers possibly interested in locating major production facilities in the state think when they see thousands of angry property tax protesters marching in the streets of the state capital?
Any tax system that penalizes people for doing the right thing in the long term is politically unsustainable.
With nearly half of all the tax bills in the state yet to be sent out by local county assessors, the cries for property tax reform will no doubt be heard for many months to come.
The time is now for Daniels to act.
Let's hope he looks favorably upon the proposal we are suggesting.
David Coker is president of the Vanderburgh County Taxpayers Association.