Lawmakers ready to talk taxes

Larry DeBoer, Legislative Services

Kevin Rader/Eyewitness News

Indianapolis - Lawmakers are getting an early start on property taxes this week. The House started Monday, and the Senate will begin discussing the issue Tuesday.

The deliberations by the House Ways and Means Committee boils down to a simple question.

"We're basically asking a couple of questions. Who should pay for local government - business vs. individuals, renters vs. homeowners, owners of equipment vs. owners of inventory, all those different questions. Who should pay, and then how should we pay? Property taxes, sales taxes, income taxes," said Larry DeBoer, Legislative Services.

Legislative Services laid out how much it would cost to cover the property tax. A 2.6 percent increase in individual income tax would be needed to get rid of half of our 2007 property taxes. Eliminating 100 percent of property taxes, obviously, would call for a bigger raise.

"So we would need an additional 5.6% increase on the individual income tax to raise 6.2 billion dollars," said Diane Powers, Legislative Services.

Replacing half of the property tax with sales tax would call for a raise from the current six percent to 9.5%. The number rises to 13.2% to cover the full property tax.

"If we can change this bill and do this bill right I am saying we need to get rid of property taxes. That needs to go," said taxpayer Abu Henderson.

"This idea of elimination has got to be on the table. After all this is our table," taxpayer David Bond said.

"I know it is a complicated issue. That is why I was impressed to at least see the governor get out in front of this. Do I agree with everything?  No, but God bless him, at least he is doing something," said taxpayer Kent Morgan. "This is the first time I've seen anyone do anything on this issue for how many years? I've been in this state for 30 years. Nobody has done jack."

Indianapolis Mayor-Elect Greg Ballard listened to the early part of the debate from the House balcony, noting that his mere presence sends a message.

"I think we are seeing the fact that I got elected talking about this quite a bit, has already weighed in on this debate quite a bit so I hope that they hear that," Ballard said.

Governor Daniels has proposed increasing the state sales to 7 cents on the dollar, from the current 6 cents, and limiting property tax bills to 1 percent of assessed valuation for homeowners, 2 percent for rental property and 3 percent for business.

Daniels also wants the state to pick up the costs of schools' general funds, school transportation and child welfare and supports limiting local spending growth to the six-year average growth of personal income.

"I'd like to have a repeal of property taxes but the only acceptable fallback would be a hard cap, and the governor's plan does have a hard cap and we'll see - I certainly do not want a cap with exemptions. That is the wrong way to go. The only acceptable fallback is a hard cap. I'd still like to see the repeal, though. I do like the local spending controls, because we need those in Marion County and I think in other places also to hold local politicians accountable," Mayor-Elect Ballard said.

Ballard estimated support in the House and Senate for a complete property tax repeal at 30 percent. "We'll see if they can push that across the edge. I don't know if they can or not," he said.

Senator Luke Kenley, a Republican from Noblesville who is chairs of the Tax and Fiscal Policy Committee, noted that the legislature has been working on the issue throughout the summer and fall. He said the current property tax crisis is an extraordinary event requiring extraordinary action, including early committee hearings.

The Senate, meanwhile, will start work Tuesday with a Tax and Fiscal Policy Committee meeting to discuss several proposals. One resolution up for consideration would propose a constitutional amendment requiring the General Assembly to establish a 1 percent cap for property taxes on owner-occupied homes. Another proposal would establish controls for managing local debt.

Many lawmakers are looking for significant reductions in the reliance on property taxes, saying property is no longer a sound measure of a person's ability to pay for schools and local government services such as police and fire protection.

Watch the hearing.