Our increase in property taxes is not due to increase in assessed valuations. The property tax rate is set by dividing the spending budget by the total assessed valuations. If the government spending is the same and assessed valuations go up, the tax rate should come down and the property taxes will be unchanged. Our 24 percent increase in property taxes is due to government spending, not increased property values.
I lived in California during a time when they were going through a similar situation. The property values were climbing quickly. Tax rates were not being adjusted to reflect the higher valuations. In many areas, the tax rates were actually going up. Government bureaucrats were spending (wasting) every cent that came in. Some people were being priced out of their homes, especially those on fixed incomes.
In California, the voters can initiate referendums to change the state constitution if backers collect a sufficient number of signatures on a ballot. An individual, Howard Jarvis, initiated an amendment, Proposition 13, to cap real estate taxes. It was passed by 65 percent of the voters on June 6, 1978. Under Proposition 13, property tax rates on homes, businesses, and farms can not exceed 1 percent of the property's market value and valuations can not grow by more than 2 percent per annum unless the property is sold. So if you owned a property on June 6, 1978, your tax rate was capped at 1 percent of the value as of that date (actually based on the 1976 assessed valuation). That cap could increase 2 percent per year. If you bought a property after June 6, 1978, the cap was based on 1 percent of your purchase price.
In addition, Proposition 13 required that all state tax rate increases by approved by a two-thirds vote of the legislature.
The government bureaucrats were unhappy. They tried to blame every government shortcoming on Proposition 13. They tried to punish the voters by doing things like reducing library hours to the point that working people didn't have access. They raised fees for government services exorbitantly. The voters pushed back with a few more referendums and by voting abusive politicians out of office and, thus, the state got through the transition.
So how has California done since Proposition 13? I spent the winter of 2005/2006 out there. It seemed to me that the economy is vibrant and growth has been good. A recent U.S. Department of Commerce press release, www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm, provides some data. The 2005-2006 percent change in Real GDP for California was 4.2 percent versus Indiana at 2 percent. The national average was 3.4 percent. Per Capita Real GDP was ninth in the nation at $41,663 versus Indiana at 33rd in the nation at $34,058.
I think that California is doing fine with spending limitations on government. I believe that Indiana might be more successful at attracting businesses and retaining professional and technical employees who tend to start well paying businesses if there were controls over government spending.
