Workable plans abound to replace property taxes

While Indiana Gov. Mitch Daniels is presenting his State of the State message to a joint session of the General Assembly, representatives of many grassroots organizations, calling themselves the Indiana Property Tax Repeal Alliance, will, for the second time in two weeks, be rallying at the Statehouse.

For the past several weeks, members of the alliance have been calling upon members of the General Assembly for passage of an unprecedented constitutional amendment providing for the total repeal of property taxes and an opportunity for taxpayers to vote on the issue in an upcoming referendum.

Many naysayers have long stated that passage of such legislation was impossible, but it is apparent that minds are quickly changing.

Last week, in a four-hour hearing before the Senate Rules Committee, chaired by Senate President Pro Tem David Long, R-Fort Wayne, members of the Alliance made a passionate case on behalf of Senate Joint Resolution 8, which sets up the procedure for the repeal of property taxes.

An amendment to the Indiana Constitution must be passed by two consecutively elected sessions of the General Assembly. It would then go to a referendum vote by the citizens of the state before it would go into effect.

The alliance, headed by longtime Indianapolis attorney-activist John Price, last week presented testimony in both the Rules Committee hearing in Indianapolis and in House Ways and Means committee hearings in both Fort Wayne and South Bend. News reports of the events said a strong contingent of northern Indiana alliance supporters repeatedly making the case for property tax repeal.

In introductory remarks before the Rules Committee, the co-sponsors of the bill, veteran Sens. R. Michael Young, R-Indianapolis, and Brent Waltz, R-Greenwood, who replaced longtime President Pro Tem Robert Garton in a surprise upset primary election in 2006, made passionate appeals regarding what they are hearing from constituents.

The argument speaks to a philosophical view that establishes a correlation between land ownership and the ability to earn income from agriculture or commerce. Unless one operates a home-based business, the argument holds, a homeowner who purchases a house in which to rear a family does not realize income from the home.

The government, therefore, levies a tax upon unrealized wealth based upon the estimated value of the property, which is not realized until the home is sold.

In many instances — particularly as they apply to senior citizens on fixed incomes — the tax liabilities have risen beyond what the homeowner is capable of paying.

In his remarks, Young presented six revenue replacement options that could immediately be implemented to replace the estimated $2.95 billion needed to eliminate "homestead property taxes."

The proposals offer legislators several options pertaining to increasing sales and income taxes, extending sales tax on all services without exemptions for business, a 3 percent transfer fee on the sale of property or raising the sales tax from 6 percent to 9 percent with no other changes in tax law.

Just before the hearing, Advance America, a membership group led by Indianapolis attorney Eric Miller, released its own commissioned study by Craig Johnson, Ph.D., of Indiana University's School of Public and Environmental Affairs.

This plan demonstrates yet another method of raising the $7.14 billion in estimated replacement revenue for fiscal 2012 to repeal all property taxes on homes, farms and businesses throughout the state.

The plan calls for the establishment of a property tax elimination fund, a 2 percent increase in the sales tax and a 1 percent increase in state income taxes, administrative savings of $107 million from eliminating assessors and serious control of state and local spending and borrowing.

The House Republican Caucus released its own plan, titled "Cut Now. Cap Forever," which endorsed a "permanent elimination of homestead property tax," "strong state and local spending caps," referendums for school construction projects, which would be paid for with local option income taxes, and numerous other provisions, many borrowed from Daniels' tax reform plan.

According to state Rep. Cindy Noe, R-Indianapolis, a House co-sponsor of Senate Joint Resolution 8, "I am not sure we have a plan that can actually fly at this point. But I think we have identified many different pieces to the puzzle, so that we can find a solution in this session of the Legislature."

David Coker is president of the Vanderburgh County Taxpayers Association