Decision time on property taxes.

• Author: Barkey, Patrick M.
• Position: INDIANA INDICATORS

THERE ONCE WAS A TIME when everyone watched network news, and there was one newscast in the heat of presidential primary season that I'll always remember. After watching a succession of unsuccessful candidates in post-election press conferences blaming anything and everything--except themselves--for their poor showings, correspondent Roger Mudd had seen enough. Just once, he said, he would like to see a candidate stand up and say it straight--they lost because folks liked the other candidates better.

One of these days someone in power will stand up and tell us what is really going on with property tax policy in Indiana. Judging from the rhetoric of the debate, I don't think that day is going to come very soon. But if they did, it might go something like this.

The property tax has been in upheaval for several years now First, it was assessment.

It's hard to say if the system of assessment used prior to 2002 was working well because no one could explain what it was. But it produced so many unbalanced situations--both between businesses and homeowners, as well as between different homeowners--that a tax judge threw the whole system out and in 1998 the Supreme Court agreed.

When the smoke cleared, everyone's assessments changed. The Legislative Services Agency said that commercial property valuation went up 46 percent, and industrial property was valued 15 percent more. But homeowners saw a whopping 106 percent increase, with much of the burden hitting owners of older homes.

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Of course tax rates were adjusted downwards to reflect the new assessments. Commercial and industrial properties got a tax cut, but 59 percent of residential property owners saw tax increases. And those increases would have been considerably larger--LSA estimates about 46 percent higher, on average--if the legislature had not moved almost a billion dollars of spending off the property tax levy completely in 2002.

Now we have more curve balls coming. One of the devices used to balance the state budget was a capping of property tax replacement spending by the state. That means that taxpayers will be bearing much more of the burden of higher taxes from this point forward.

And why are they going up? Perhaps you've noticed in your latest assessment. Market-based assessment was not a one-time change. Valuations for real property--buildings and land--are trended to reflect market conditions. And in areas with slow or no growth, costs of providing services...