The property tax situation in Indiana has the potential to have a significant impact on Kosciusko County.
And when I say significant, I don't mean it in a positive sense.
Frankly, if I was a county commissioner or a county councilman, I'd be shaking in my boots.Essentially, what I see happening is the state legislature giving everybody in Indiana a property tax break and telling the counties to make up the difference.
This whole mess started when courts ruled unconstitutional the way property in Indiana was taxed.
So the legislature came up with the new "true market value" system of taxation. At the same time, the inventory tax for business was removed. The purpose was to make Indiana a more attractive destination for businesses. And at the same time, ag land was assessed at $880 per acre.
This drove property taxes of homeowners way up, and there was a hue and cry across the state for reform.
So now we have Eric Miller running around the state holding town hall-type meetings calling for a statewide referendum on a constitutional amendment to repeal property taxes.
I don't think that really has a chance of happening because there aren't enough legislators willing to vote in favor of a referendum.
But if by some strange twist of fate it was put to a referendum, I'm pretty confident it would pass. Who would vote against eliminating property taxes?
Then there is Governor Mitch Daniel's plan for property tax reform that was floated a couple weeks ago.
He called for a cap of 1 percent of assessed valuation on single-family homes, a 2-percent cap for rental properties and a 3-percent cap on business and industry. I'll call that 1-2-3.
The other major revisions in tax policy pitched by the governor included a 1-cent per dollar increase in the state sales tax, required referendums on major building projects and appointing one assessor per county and eliminating township assessors.
These and other, smaller changes he's proposing would decrease property taxes by 33 percent, he says.
Finally, we have a panel of legislators who spent months studying the property tax situation in Indiana.
They came up with a plan similar to the governor's with regard to the 1-2-3 caps and the 1-cent sales tax increase.
They did not recommend the building project referendum and favored an elected assessor instead of an appointed one.
The commission's proposal calls for a 50-percent reduction in property taxes.
Both the commission's and the governor's plans included a pile of other proposed changes including asking the state to assume the cost for local levies for things like child welfare and reducing local spending growth.
Both plans also seem to suggest that the state can offset property-tax reductions by increasing local income option taxes, increasing the sales tax or adding to the things that are subject to sales tax, like services.
Some of these proposals might actually work in some counties.
But my view is they would have a terribly negative impact in our county.
Here's why.
Just for grins, I looked up a piece of property on Winona Lake in Warsaw.
This particular property has an assessed value of $1.15 million. The homeowner is liable for $20,600 in property taxes.
So let's say Eric Miller's plan prevails and property taxes are repealed. He's talking about raising the sales tax by 2 cents per dollar and the state income tax 1 cent per dollar.
If you do the math, his plan comes up a couple billion short of what property taxes currently raise statewide.
But how in the world will Kosciusko County make up the $20K that property owner I just wrote about pays?
And that's just one of hundreds and hundreds of lake property owners in this county. Ever drive around Lake Wawasee? How much revenue do you suppose is generated by the homes around that lake?
Eliminating all of that revenue would be disastrous for our county.
So let's look at the other plans out there, both of which have the 1-2-3 thing going on.
Our Winona Lake property owner's property taxes under either of those plans would be capped at 1 percent of assessed valuation, which would be about $11,530. That's a savings of around 8,500 bucks for the property owner. Of course, that's 8,500 bucks out of the counties' coffers, too.
And again, that's just one homeowner in of hundreds in similar situations. The effect on our counties' budget would be staggering.
How much stuff would that homeowner have to buy to put $8,500 back in the tax base through a 1-cent per dollar sales tax increase? $850,000.
Not likely.
All these proposals also rely heavily on "controlling local spending." I agree that spending can be curtailed to a degree. I've written about it many times.
But it can't be curtailed that much without doing draconian things like closing schools and laying off cops and firemen.
The only answer for our county will be to boost the county option income tax.
Now let's think about that for a moment.
Lots of people who own those homes around lakes in our county don't live here year round.
They don't work here. The county income tax hike wouldn't affect them.
The people who live and work here will have to up the difference.
And this is only the homeowner portion of the tax picture. There are similarly negative implications for our county with regard to property tax reductions in rental property and businesses.
Seems to me we need to let legislators know that before they go tweaking property tax policy, they better consider the dramatic and negative effect it could have on places like Kosciusko County.
