Something's got to give with regard to property taxes in Indiana.
I am hearing from local property owners in droves. I am hearing horror stories of property taxes going up 60, 70, 80 or more than 100 percent.
One property owner came in the office and tearfully told me the story of how he was going to have to sell his home because he couldn't afford the property taxes.
Gov. Mitch Daniels has ordered a panel to study local government. Assessments have been scrapped in three Indiana counties and more may be on the way.
There may be a special session of the Indiana Legislature called to address the problem.
So what's going on here, anyway?
Well, the problem started a long time ago and for decades, property in Indiana was assessed under a fairly arcane system
Real property used to be assessed based on the value of land plus replacement cost minus depreciation. Depreciation was considered regardless of how well maintained the property was. The result was that property values were almost always a lot lower than market value.
Older properties were even more likely to be under-assessed because they had so many years of depreciation.
So under the old system, there was a continuous shift of tax burden to business, personal property and newer homes. (Most of the personal property was business-owned.)
The old way came up with a "true tax value."
In 1993, a lawsuit was filed by the Town of St. John against the State Board of Tax Commissioners.
The plaintiffs argued that the way Indiana calculated property values was unconstitutional. They said under the old system, properties with the same market values could have quite different tax values.
This, they said, was unconstitutional because the Indiana Constitution requires "uniform and equal rate of property assessment and taxation."
In 1998, the Indiana Supreme Court ruled that property should be assessed "under a system that incorporates an objective reality" to determine the true tax value of a property and required the state to implement a new system of assessments.
The new regs had to be in effect by Jun 1, 2001 and the new reassessment had to occur by March 1, 2002.
The new system, simply stated, was based on predicted selling prices of property. It was a switch from "true tax value" to market-based assessment.
So the 2002-'03 assessment was based on market value and the tax bills on many older homes rose dramatically.
Seeing the impact, lawmakers came up with a tax reform package that increased state property tax relief payments by a billion dollars.
After that, ginormous increases were dwindled down to just big increases.
But property tax relief became too large a part of the state budget and lawmakers had to cap it.
Lawmakers also got rid of the inventory tax during this time period. This was supposed to make Indiana more business-friendly and more attractive to businesses looking for a place to locate.
But it also shifted that portion of the tax burden from businesses to homeowners.
The bigger the town, the bigger the impact of the inventory tax elimination. That's why homeowners in places like Marion County - where there's lots of businesses with inventories - got hit particularly hard.
Another ingredient in the property tax stew is trending.
Remember, the Supreme court says assessments have to stay close to property selling prices.
Those prices change all the time, so assessments have to change. That's trending.
This year was the first year for it in Indiana, but we were playing catch up. This year's trending changed assessments from 1999 selling prices to 2005 selling prices.
In our county, trending was excruciating for many lake property owners because they already endured a big tax hike getting to the new "market-based" system of assessment.
Trending of these homeowners property from 1999 to current market value really boosted their property taxes.
The odd thing in all this is that the amount of taxes collected by local governments isn't rising all that much.
Local and state government aren't spending a lot more money, it's the shift from business to homeowners that is causing most of the woes.
The net effect of all this is a property tax crisis.
There have been protests in Indianapolis and calls for the elimination of property taxes altogether.
Irate property owners in Indianapolis held what they called The Indiana Tea Party in Broad Ripple. They put their tax assessments into a giant bag and tossed it in the canal.
"We hope it sparks a revolution, because if it doesn't, they will make a ghost town out of downtown and areas like this because people cannot afford to stay," one property owner said. "They can't afford to sell. They will just lose their homes."
Failed 2004 gubernatorial candidate Eric Miller, founder of the Advance America lobby group, organized one of the protests in Greenwood. More than 700 people showed up, according to a report in the Indianapolis Star.
"After living in your home 20, 30, 40 years, if you can't pay your property taxes, the government will take your home and sell it - and that's not right," Miller said. "The only way to let people own their own home is to abolish property taxes."
Miller's property-tax elimination plan calls for increasing the state income tax from 3.4 percent to 4.4 percent and raising the state sales tax from 6 percent to 8 percent, the Star reported.
Miller told the group the General Assembly has almost all of the votes needed to pass a constitutional amendment eliminating property taxes.
About a dozen state lawmakers attended Miller's rally, including Rep. Woody Burton, R-Greenwood
Burton said he proposed a bill 15 years ago to eliminate property taxes, but that it wasn't taken seriously. He urged the public to support such action now.
"This is going to go on for a little while; it's not something that will be fixed tomorrow," he said. "We can get change done if you stay engaged."
This week, Indiana House GOP Leader Brian Bosma called for $200 million in tax relief via a 5-point plan. He sent a letter to the governor and other legislative leaders. He hopes they'll meet, reach consensus on the plan and that the governor will call a special session of the legislature to enact it.
This, of course, is only a stop-gap measure. What's really needed is lasting reform and that concept seems to be sinking in with lawmakers.
Bosma: "Of course, permanent reform of our tax system, and from my perspective, the repeal of residential property taxes, must be on the agenda for the next legislative session."
It should be sinking in. It was those very same lawmakers who got us into this mess in the first place.
I never would have dreamed it, but there are lawmakers in high places talking about repealing property taxes in Indiana.
Stay tuned. I'm cautiously optimistic that there may be hope for taxpayers after all.
