Property Tax Reform-Greater Scrutiny by Taxpayers

Governor Daniels statement regarding Indiana's property tax discussion.

I kept in close touch with events during my week of family vacation, and like everyone am dismayed about the size of residential property tax increases in Marion and some other Indiana counties. Obviously, increases of the magnitude some homeowners are facing are unacceptable and we must look for immediate help and long-term reform.

Let's start with the basics: property taxes pay for local spending and local borrowing. They are collected by and for local government, schools and libraries. When, as in Marion County, local spending goes up 10 percent per year, taxes are going up with it. Local assessment that claims Marion County home values grew 19 percent faster than commercial property is another obvious factor in Indianapolis' acute problem.

Although the cause of the problem is local, state government has tried repeatedly over 35 years to relieve the property tax burden on Hoosier citizens. Through sales and income taxes, the state already provides more than $2 billion annually -- a quarter of total property taxes -- to subsidize local government spending. The recent legislature dedicated another half billion dollars to this purpose, and also gave localities major new flexibilities to reduce property taxes and replace them with income taxes. This new power to reduce property taxes has not yet been used in Marion or any other county.

As governor, I will take every step I have authority to take to help Hoosier homeowners. First, I have directed the Department of Local Government Finance to approve any county's application to permit homeowners to pay their property taxes in installments and to extend bill due dates. I have ordered the Indiana Bond Bank to facilitate short-term financing by local governments that need cash while awaiting these installments.

I am also exploring some ideas with legislative leaders about how a special session might provide immediate relief directly to property taxpayers who have been especially hard hit. I have instructed DLGF to probe the unexplained disparity between residential and commercial reassessment in many counties, taking follow-on action if warranted. The state will not approve pending budget orders until commercial and industrial real estate assessments have been further analyzed. DLGF also will notify localities that upcoming budgets that spend above the rate of inflation will be rejected until spending is under control. Pending and future bond issuances also will be held in problem counties.

Looking ahead, some costs now borne locally, such as the child welfare levy, can be shifted to state government, never forgetting that the money all comes from the same taxpayers. The bottom line is there can be no solution without greater control of local spending and borrowing.That means greater scrutiny by taxpayers and by state government, and it means fundamental reform for the long term.

We have far too many layers, elected offices, geographic units, school districts and overhead. I will have more to say on this subject in a week or so.