[r47] Rep. Foley working hard to resolve property tax issues (8/10/2007)

Friday, August 10, 2007

Start Date: 8/10/2007 All Day
End Date: 8/10/2007
If there is one thing every legislator agrees on, it is that we need to do something about Indiana's outdated property tax system. All parties have been proposing ideas and now in a bipartisan fashion, we need to provide immediate relief. We also need to develop a long-term solution to our property tax system. I realize the thought of repealing property taxes all together is pleasing to the ears. However, the reality of this "all or nothing" proposal is riskier than it sounds. If we remove property taxes altogether, we will be left with the question: Where will we get the money to replace the property taxes?

I would support a constitutional amendment to repeal property taxes IF the following items were constructively addressed:

1. Would there be an unfair tax shift to farms and business?
2. Should services, such as fire, police and water, be funded utilizing alternative funding sources or property taxes?
3. How would we pay for local government, schools and school construction, which comprises 99% of property tax revenue expenditures?

In addition, property taxes are tied to many outstanding public bond obligations. How would we "shift" these obligations without increasing the cost to the taxpayers?

You are probably aware that less than 1% of property tax revenue goes to the state, (most which goes to the State Fair). The vast majority is allocated to local governments, schools and school building projects. This year's state-wide gross tax levies total roughly $8.7 billion. The state currently provides $2.4 billion in property tax relief. Therefore, about $6.3 billion would need to be raised utilizing alternative methods to fully replace property taxes. A 1% increase in sales taxes would yield roughly $950 million, and increasing the state's income tax by 1% would produce about $1.4 billion. To fully replace property tax revenue, income taxes would need to be raised about 2%, (to 5.4%) plus a 4% increase in the sales tax (to 10%). Many people would be hurt by those increases.

As far as addressing immediate relief, I am in full support of the House Republican $200 million immediate property tax relief plan that we released last week. The five-point plan to grant immediate relief to the hardest hit residential taxpayers will: (1) convert the rebate check (which some have predicted will now be issued as late as February of 2008) to a credit on the fall 2007 installment of taxes; (2) extend the deadline for filing of the homestead credit for 2007 to September 15 of this year; (3) grant local counties the flexibility to apply the credit to those individuals and communities hardest hit by recent tax increases; (4) freeze child welfare levies in 2007, with the state picking up all levy increases for 2007 and following years; and (5) appropriate an additional $100 million of state funds toward immediate residential property tax relief. Points 1, 4, and 5 would be distributed as a credit on fall 2007 tax bills.

I have received more inquiries about the extension of the homestead credit than anything else. It is not commonly known that you must file the homestead credit in order to receive your rebate check or credit. I understand the burden on local governments, but if nothing else, it is extremely important to extend the homestead credit and I urge everyone to come to an agreement on this.

Before a final decision on the matter is made, I believe it is my responsibility to understand exactly what the outcome will be to avoid any unintended consequences. With the proper foundation, I could support an elimination of property taxes, which would require a lengthy process. I would only agree with a call for a Special Session if we have an agreement by leadership for a plan that can be implemented now. We must have a plan that is feasible and result-driven. Otherwise, a Special Session would be a waste of time and money.

I want to thank everyone who has voiced their concerns and I urge you to continue contacting me if I can be of further assistance. It is my hope that we will find a short-term and a long-term solution to our property tax problems.