Tax reform points are highlighted
Comet staff report

On March 14, the Indiana State Senate passed historic property tax reforms under which most Hoosiers could see an average 27 percent decrease in their property taxes in 2008 and an approximately 38 percent decrease by 2010.

Governor Mitch Daniels signed HEA 1001 last Wednesday.

"Significant, permanent property tax reform in Indiana is long overdue, said Senator Brandt Hershman, co-author of House Bill 1001 and Senate conferee. "The reform package passed will bring our tax code into the 21st century and protect Hoosier taxpayers."

Hershman said property taxes can be decreased further if counties adopt a Local Option Income Tax.

"If a county adopts a one percent LOIT and applies 50 percent of that revenue to homesteads and 50 percent as broad-based property tax relief to all taxpayer groups, the average reduction in homeowners' tax bills would be 53 percent by 2010," Hershamn said.

Components of House Enrolled Act 1001 include:

• Cuts in property taxes - removes $1 billion in school and local government costs from the backs of property taxpayers, including farmers and businesses, while maintaining local control of schools;

• Caps on property taxes - a one percent property tax cap on owner-occupied homes, two percent on other residential and agricultural properties and three percent on businesses will be phased in by 2010. Only local taxpayers, not politicians, can exceed these "circuit breakers" through a voter referendum. Because schools have no other substantial revenue, the bill sets aside $120 million to help them live within the caps and $400 million for economic "rainy days." The phase-in allows time for local government officials to identify and implement new efficiencies. Distressed local governments can appeal to the state for help;

• Controls on government spending - all taxes result from government spending. Property taxes are determined, collected and spent at the local level. Statewide figures show local levies have outpaced inflation by more than two-to-one. To control local government spending, the bill requires voter approval by referenda of all major government construction projects. It closes loopholes used by local governments to increase property taxes and establishes stricter guidelines for school construction. Further, it provides county-level scrutiny of budgets;

• Constitutional guarantee - historically, whenever other taxes have been raised to reduce property taxes, the reductions were temporary. Property taxes returned to previous levels, while other increased taxes remained. To prevent this "creep" in the future, HEA 1001 includes an amendment to Indiana's Constitution that would make the caps permanent. This constitutional amendment will require passage again in 2009 or 2010 by a separately-elected legislature, then approval by Indiana voters; and

• Little Red School House - schools must adhere to stricter guidelines for planning and construction and state-approved school designs will be maintained in a state design bank or repository.