Property tax debate continues at state Capitol
By Brigid Curtis Ayer
The finish line is in sight for lawmakers racing to deliver property tax relief for Indiana residents by the March 14 adjournment deadline.
Which property tax relief plan will make the final hurdle? Will it be Gov. Mitch Daniels’ plan, the Senate Republicans’ plan, the House Democrats’ plan or some combination of the three?
Perhaps the bigger concern, a question being asked by the Indiana Catholic Conference, the Indiana bishops’ official public policy representative, is: “How will the property tax relief plan affect the least among us—the poor?”
The Church is not the lone voice raising this concern for the poor. Two Catholic lawmakers, Rep. John Day (D-Indianapolis) and Sen. John Broden (D-South Bend), have chimed in to stand up for lower income residents.
Rep. Day offered an Earned Income Tax Credit (EITC) amendment to House Bill 1001 which was adopted and passed the full House in late January. The Indiana Catholic Conference supported the amendment.
Rep. Day’s amendment increases the EITC from 6 percent under current law to 9 percent.
“The Earned Income Tax Credit is designed to help lower to moderate income families, especially those with children,” Rep. Day said. “Over 450,000 families in Indiana have benefited from it. For a poor person, a tax credit is almost always better than a deduction.
“On a credit, if the credit is greater than the taxes owed on the income earned, the person gets a refund. For example, a family of three with an income of $15,000 would get approximately $250 back at the current 6 percent EITC,” Rep. Day said. “Under the House version of House Bill 1001, that same family would get about a $400 credit at the proposed 9 percent credit. The Earned Income Tax Credit is a very targeted, focused tax credit to benefit the families that really need it—the working poor.
“Tax policy should be fair,” Rep. Day said. “It should be based on ability to pay and should help those like the elderly on fixed incomes, the working poor and anyone that is struggling to get by. In hindsight, the U.S. bishops got it right in their 1986 pastoral letter, Economic Justice for All, when they specifically mention tax fairness and that the tax code should reflect a sensitivity to the needs of poor.”
House Bill 1001, which contains significant portions of the House Democrats’ property tax plan, passed the full House in a bipartisan vote of 93-1 on Jan. 24.
The primary components of the House Democrats’ plan include:
- Homeowners would pay property taxes based on income, and caps the maximum payment of homeowners’ property taxes to 1 percent of household income beginning in 2009;
- Increases the renter’s deduction from the current $2,500 deduction to $5,000;
- Eliminates township assessor positions statewide;
- Excludes instruction school building projects from voter referendums; and
- Excludes local debt from the cap.
The Republican-controlled Senate amended House Bill 1001 and ties property tax relief to assessed valuation of property rather than to household income.
The Senate Republicans’ plan also includes a property tax cap of 1.5 percent of a home’s assessed value in 2009 and 1 percent of a home’s assessed value in 2010, excludes the earned income tax credit, increases the renter’s deduction from the current $2,500 deduction to $3,000, and allows for voter referendums on all building projects.
Senate Democrats offered several amendments on the floor to help low to moderate income earners in Indiana, to no avail.
Sen. Broden offered an amendment to tie property taxes to one’s ability to pay, which paralleled the House Democrats’ plan. His amendment would cap property taxes to a maximum 1 percent of household income.
“Those with the lowest income would receive the highest property tax credit,” Sen. Broden said. “Households with an adjusted gross income [AGI] of $35,000 and below would get a 90 percent credit, $35,000 to $50,000 get a 75 percent credit, $50,000 to $75,000 get a 62 percent credit, $75,000 to $100,000 get a 52 percent credit and those with incomes over $100,000 would get a 40 percent homestead credit.
“The problem with the Senate version of House Bill 1001 is [that] people’s homes with an assessed valuation of $200,000 or more are getting the lion’s share of the property tax relief,” he said.
Sen. Broden explained that because the House and Senate version increase the sales tax from 6 to 7 percent, which disproportionally burdens lower to middle income families, the Senate version doesn’t offer poorer families any way to offset the higher taxes they will pay.
Under the House Democrats’ plan, which in part was contained in Sen. Broden’s amendment, “The big winners would be the widow or older couples that have a lot of equity in their home, but are on a fixed income,” Sen. Broden said. “Local governments and schools are very nervous about the Senate version of House Bill 1001 because they are not sure where they are going to get the money to fill the shortfall. The House Democrats’ plan allows local governments the flexibility they need.”
House Bill 1001 entered the conference committee phase on Feb. 29 where the four conferees—a House Democrat, House Republican, Senate Democrat and Senate Republican—began to hammer out differences.
The four conferees are Rep. William Crawford
(D-Indianapolis), Rep. Jeff Espich (R-Uniondale), Sen. Luke Kenley
(R-Noblesville) and Sen. Tim Skinner
(D-Terre Haute).
Once they agree on a final plan, it will be voted on by the House and Senate, and sent to the governor for approval before it becomes law.
(Brigid Curtis Ayer is a correspondent for The Criterion.)†