[r51] The Effect of the Tap Caps on Agricultural Property (3/30/2009)

Monday, March 30, 2009

Start Date: 3/30/2009 All Day
End Date: 3/30/2009

Permanently capping property taxes is a top priority of House Republicans, and since last year, we have been working hard to amend the property tax caps into the Indiana Constitution.


Many of you are familiar with the property tax caps - 1 percent for homesteads, 2 percent for rental property and agricultural land, and 3 percent for business and personal property - but I understand there are some misconceptions about how the caps work.


For example, I have heard from some farmers who believe the caps will shift taxes away from homeowners, resulting in higher tax bills for farmers. This is a legitimate concern, but let me assure you the property tax caps will not force farmers to shoulder more of the tax burden.


I, along with other legislators, did not want the property tax caps to cause a tax shift, and so we took great care to design the caps in a way that prevents local governments from making up revenue losses on the backs of those taxpayers who have not yet reached their caps.


Therefore, we ensured that local governments cannot recover lost revenues by artificially inflating tax rates or charging a higher rate to property owners who would otherwise be below their cap. This means farmers who are currently below their cap will not see their taxes automatically increase to 2 percent, nor will they pay more in taxes because homeowners in their district are benefiting from the cap.


Instead, the tax relief provided to any property owner as a result of the caps is simply a loss of revenue to local governments and a dollar-for-dollar savings for property tax-payers.


The General Assembly chose to place agricultural land under the protection of the 2 percent cap in recognition of the extraordinary economic value of the agriculture industry. While this cap is higher than the 1 percent cap applied to homestead property, it is lower than the cap for all other types of non-residential business property in the state. Additionally, the property taxes levied on your farm equipment and farm buildings will be capped at 3 percent, which is the same level of protection afforded to all other types of business property.


Finally, keep in mind the taxes levied on your home will be capped at 1 percent, which is the same benefit provided to all other homeowners.


I believe the property tax caps are a win-win for owners of agricultural land. The caps - at any level - are a benefit that provides added protection at no cost to farmers. They will shield farmers from unreasonable tax bills and will provide peace of mind and certainty to owners of agricultural land.


All in all, the property tax caps will prove to be a good deal for Hoosiers in the agriculture industry.