Who wins, who loses?

• Author: Beck Bill
• Position: Indiana's property tax

Indiana's property tax to be based on a fair-market-value system

The only certainties in life may be death and taxes, but since ate May, Indiana property owners have been dealing with a great deal of uncertainty concerning property taxes. On May 31, Indiana Tax Court Judge Thomas Fisher ruled that Indiana's property-tax assessment system is unconstitutional.

Indiana and Nevada are the only two states in the nation that assess property on a "true tax value" basis, which is essentially a replacement-cost-minus-depreciation method of determining property value for taxation purposes. Every other state in the union taxes real and personal property based on that property's fair-market value, which may or may not reflect the actual replacement cost.

In his May 31 ruling, Judge Fisher agreed with the plaintiffs - the Indiana Civil Liberties Union - that the state's constitution requires a system of property assessment and taxation based on market value. Judge Fisher gave members of the Indiana General Assembly until March 1, 1998, to come up with a system that replaces Indiana's current method of assessment and property taxation.

EASIER SAID THAN DONE

The likelihood of that happening without a lot of weeping and gnashing of teeth is small. Indiana's commercial and agricultural property owners are particularly concerned about what the future might hold.

Kevin Brinegar, vice president of public finance and education for the Indiana Chamber of Commerce in Indianapolis, is a strong proponent of the fair-market-value system. Brinegar says a fair-market-value system "would add significant integrity to the system," while giving business people a better idea of the value of their property as well as simplifying grounds to challenge unfair assessments.

Brinegar says he thinks fair-market value will be favorable for commercial properties, because commercial property will be "more closely assessed relative to residential and agricultural property." The Indiana Chamber of Commerce, he says, favors "simultaneously lowering overall property-tax burdens."

He believes state businesses have been paying a larger burden of the property tax under the existing system. In several areas of the state, Brinegar says, the business community bears a disproportionately large share of the property-tax load.

Scott Weaver, a principal with Indianapolis-based Geo. S. Olive & Co. and director of the accounting and consulting firm's client services state and local group, says many Indiana property taxpayers are likely to see an increase in property taxes under the new fair-market basis since the "current system artificially places a lower assessment than what the true value" of the property really is.

Weaver thinks the biggest losers under a proposed shift to fair-market-value assessment will be residential property taxpayers...