[r53] Cherry Chat: Property Tax Reform Passes House (1/24/2008)

Thursday, January 24, 2008

Start Date: 1/24/2008 All Day
End Date: 1/24/2008

The work in the House of Representatives has picked up tremendously over the last two weeks. This week, the full House worked on the property tax relief package adding amendments and making changes. Thursday, we passed the property tax relief package. While it is not a perfect bill, it has more good than bad and it will help homeowners.

On Tuesday, my House colleagues and I worked for 5½ hours on amendments to House Bill 1001, the property tax plan. There were more than 100 amendments filed on the bill, but we only discussed about 35 of them.

Part of the reason that we only did about one-third of the amendments is because different legislators will have the same idea. For example, there were at least four amendments that placed a 2-percent cap on the amount of taxes that farmers pay for agricultural land. Despite the repeat amendments, we were still there late into the night working on tax relief. With all of the amendments, much has changed in the property tax bill.

One idea that I liked was the "Little Red School House" proposal. Each time a community wants to build a new school, they must hire architects, designers and other personnel to create from scratch the blueprints for the new building. That can cost taxpayers a lot of money. Indiana pays much more than the average national per-square-foot cost for school construction. This amendment will require schools to choose from certain pre-designed and pre-approved school construction plans. It will save taxpayers millions of dollars in design fees.

I was extremely disappointed that the major portion of the Gov. Mitch Daniels' referendum language was removed from the bill. We had proposed having referendums on major government spending projects. A referendum would allow citizens to be able to vote on each project, giving them true control of their communities' local spending.

Another part of the property tax plan that I wish were still in the plan is the state spending cap. In the bill, we are placing a cap on the spending of local government to by tying government growth to income growth. I believe this same restriction should be applied to the state government. When it comes to cutting spending, what is good for one level of government is probably good for all levels of government.

While some good amendments that will help save taxpayers money were adopted, other amendments presented by the majority party may end up increasing state spending. One such amendment spends $150 million to create a rainy day fund for school tuition and transportation. While I agree that we need to have money in reserve, I think we should create this fund in the budget year instead of mandating that we set aside this money now. I also have problems spending $150 million in new money in a bill that is supposed to provide tax relief.

The majority party also passed an amendment that will provide tax relief on a sliding scale of how much your home is worth. If your home is valued at $244,000, you will get a larger deduction than if your home costs $246,000. I don't believe that this is a sound policy that we should be pursuing.

Currently, all homeowners are treated the same. Their property is assessed and the amount they pay is determined by the tax rate. A person who owns a $300,000 home pays the same percentage of their assessed value as someone who owns an $80,000 home if they live in the same taxing districts. Under this bill, that would no longer be the case. Home ownership no longer is an indicator of wealth. There are many people on fixed incomes who own homes that are worth more than when they bought them because of appreciation. This amendment potentially punishes those that have lived in their home for many years. We should continue to treat all homeowners equally and not arbitrarily decide that if a person owns a home that is worth more that they receive less tax relief.

One other amendment that will cost the state somewhere between $50 and $80 million requires the Department of Local Government and Finance to develop a computer system for each county. This is just another example of excess spending in what is supposed to be a property tax relief bill. All told, there is nearly $350 million in new spending in this bill. While the bill on the whole is still good, I am hopeful that as we move through the legislative session we can pare down much of that additional spending.

As always, please contact me with any questions, comments or concerns. Send letters to me at 200 W. Washington St., Room 401, Indianapolis, IN 46204; e-mails to H53@in.gov; or call toll-free 1-800-382-9841.