The Indiana General Assembly reacted to protests from voters over rising property tax bills and in 2008 placed property tax caps into law. The caps limit tax bills to one percent of the assessed value of homes, two percent for farms and rental properties and three percent for businesses.
In 2010, voters affirmed that action of the General Assembly by statewide referendum as seventy one percent voted in favor of placing the caps into the Indiana Constitution.
The predicted result: homeowners, landlords and businesses would save significant dollars. Several years later, that has held true and Indiana has vaulted to the front of most business rankings, boasting the best business climate in the Midwest and one of the tops in the country. This is in large part because of the “certainty” that exists in the Indiana tax system.
At the same time, the action has left many state and local government units scrambling. Initial predictions were that there would be over $500 million in annual savings to the taxpayers statewide, meaning less dollars available to government units for the delivery of essential services.
Many lawmakers felt that the significant loss of tax revenue would force local governments to consider consolidation options, like reducing the number of school or library districts, or the consolidation of police, fire or emergency dispatch services. Across the State, communities have been slow to follow that thinking and only a few consolidations have occurred.
In St. Joseph and Lake Counties, an additional ten years were granted for the full implementation of property tax caps, to help the counties better deal with outstanding debt obligations. Still, 2017 estimates by the Department of Local Government Finance (DLGF) had $78 million in total savings to the taxpayers.
The City of South Bend, St. Joseph County, the City of Mishawaka, and the South Bend School Corporation were hardest hit. The other school corporations, libraries, and public transportation also saw major cuts in the amount of revenue available to them to deliver services. Those units are bracing for additional cuts as the full implementation comes in 2020.
For consumers, what that means is more money in your pocket to spend on other things. I’m one that has benefitted, my property taxes are lower now than before the implantation of tax caps. But am I better off? The jury is still out on that one.
In St. Joseph County, no consolidations have occurred, and there doesn’t seem to be much appetite for that. Instead the level of services has or will be impacted.
It seems daily in the news that taxpayers are wondering about police protection, leaf collection, street paving, soon snow plowing, park services, public transportation, 911 services, the number of students in a classroom, the number of schools in a system, school transportation, I could go on.
The cap of property taxes has a direct correlation to the delivery of each of those services, and so many more. The same public, of which an overwhelming majority voted for tax caps, have been slow to embrace changes in service levels. I’m predicting it will only get more difficult in the coming years.
While our elected leaders are reducing service levels to meet current budget demands, they also must carefully balance the need to make our communities an attractive place for new people and businesses. Something must give.
We can’t tax or cut our way to prosperity. We have to find the right balance. But we must be quicker to embrace change, after all we demanded it in 2008 and affirmed it in 2010.