Tax Caps Won’t Mean Much For Rural Indiana

by Curt Kovener Curt line

Before there is too much rejoicing about the apparent upcoming passage by the state legislature for property tax caps allowing voters in November to cast their ballot to put the caps into the state constitution, it would be good to know what impact such a restriction will have here in rural Indiana.
For those who have not been paying close attention, urban area folks with high property taxes (and isn’t it curious that when there is a big city problem, it becomes a statewide issue?) have been pushing for a statewide constitutional amendment to limit residential property taxes to one percent of a property’s assessed value. Farm owners and landlords will be limited to a two percent of assessed value cap and commercial & industrial properties would be limited to a three percent property tax cap.
The uneducated residential owners are leaping with joy because they think with this measure their property taxes will be frozen and never go up. And their exuberance is encouraged by some of the carefully crafted messages from state elected officials.
Sorry to be the bearer of bad news but should this measure pass, it won’t make even a minor impact on property tax bills here in rural Indiana.
On residential property with an assessed value of $100,000, a 1% cap would be an annual maximum tax of $1,000. But keep in mind most residential homes have a Homestead Exemption (this is an annual tax abatement of up to $45,000 from the assessed value if you own and reside in the home) so this home with a $100,000 AV is only paying taxes on $55,000. And when you also add in other deductions the state allows, this same home would be paying property taxes on a value of just over $40,000.
Multiply that net AV times the most recent tax rate in Crothersville of about $1.89 (other areas of the county are lower) and this $100,000 assessed home pays around $750 in property taxes. That’s $250 below the maximum 1% cap.
While you may be smiling and saying “Well, good!”, I do hope you are sitting down while reading this, because this homeowner’s property tax bill could go up by a whopping 33% before it would begin to nudge the 1% cap.
WHAT!!??!! Property taxes can be increased after they are capped??
You betcha!
Do you have new comfort level of what the property tax caps will do for you? Farmers, business owners and landlords could face an ever greater potential increase before “capping out”.
Also consider that assessed value changes based on what other homes similar to your sell. And when your AV goes up, the 1% cap escalates as well.
Each week, the Times print edition publishes sales disclosures—what properties are sold and for what amount. It might be a good idea to become a regular reader of those values and record them for your neighborhood. That kind of historical information can be used a evidence of like kind and quality values should the assessed value on your residence be increased for no substantiated reason other than the state directed values to be raised by a specific percentage.
Should the legislature pass the tax caps bill (and from all indications they will) that will mean you and I will get to vote on them in November. You can vote for them if you like thinking that you have finally stuck it to government. I will vote against the measure because, as I have explained, government has once again, already stuck it to us.