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Can Indiana's reliance on property taxes to fund schools and other services be reduced or eliminated?
That's the question the Citizens' Commission on Taxes is attempting to answer, and the head of the commission was in Warsaw Tuesday to get public input on the issue. The public hearing was the last of five conducted throughout the state over the last month.
"The governor asked us (the commission) to determine how and what taxes to reduce in light of the budget surplus," said C. Kurt Zorn, who is also a professor of economics at Indiana University. "Can we increase the revenue and reduce our reliance on the property tax system? Can we ensure a stable tax base?"
Zorn said the committee began its work in 1997 with a study of Indiana tax structure in comparison to other states. Eliminating the property tax would require revenues to be gained through other means that may be considered just as onerous to the public, Zorn said.
"To replace the property tax, you'd have to do a number of things to replace those funds," he said. "Sixty percent of the property taxes come from businesses."
By eliminating the property tax, sales taxes may have to be increased, which means private citizens would pay more, a prospect most people oppose.
Kosciusko County Democratic Chairman Steve Haines concurred, saying a survey conducted during the last legislative elections said taxpayers did not favor eliminating property tax if other taxes had to be increased.
"We asked people last legislative election if they wanted to do away with the property tax," Haines said. "When asked if they wanted to pay more in state income tax or inventory tax, they said they wanted the tax to stay the way it is."
Another option being considered by the commission, Zorn said, is to have nonprofit organizations, who usually pay no taxes, start paying for some of the services they receive, Zorn said.
"One of the provisions is that some 501(c) organizations that claim to be tax-exempt from property taxes, when they aren't entitled to those exemptions," he said. "You take those things off the books and the rest of us have to pay higher taxes.
"It's been a subcommittee recommendation to assess those organizations a fee for fire and police service in lieu of them paying taxes," he said.
The commission is expected to complete its deliberations and issue a final report by the end of the year, Zorn said. The legislature will enact some form of property tax revision in the next general session, he predicted.
"I'm sure you will see tax legislation this coming legislative session," he said. "You're probably going to see more than a few proposals for change."
