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10-24-01
Reassessment: How Did We Get
Here?
Here's a whirlwind history of our property tax assessment difficulties.
It all started in 1993. Taxpayers in Lake County filed suit with theIndiana
Tax Court challenging the constitutionality of our property tax assessment
system. They claimed the system didn't have much rhyme or reason. It wasn't
based on market value, for one thing. Taxable values were something other
than what a property could be sold for.
The case bounced back and forth between the Indiana Tax Court and StateSupreme
Court for five years. Finally, in December 1998, the Supreme Court decided.
The Tax Board's assessment regulations wereunconstitutional.
The Tax Board started working on new regulations. By November 1999 ithad
some. Hearings were held. None of the interest groups liked theproposed
regulations. In December, Gov. Frank O'Bannon suspended work on the new
regulations.
In its 2000 session, the General Assembly considered several bills revising
assessment dates and regulations, but couldn't agree on any.
Judge Fisher of the Tax Court saw both the executive and legislative
branches at a standstill. He got mad. In May 2000 he ordered the Tax Board
to finish the reassessment by March 1, 2002. The Tax Board went back to
work. By May 2001 the regulations were done and signed by the governor,
and the local assessors started reassessing the state's 3 million parcels
of taxable land and buildings.
The new regulations use market value with a twist. Market value assessment
with no other changes would increase the tax bill of the average homeowner
about 33 percent. The average business would see an 18 percent tax decrease.
To avoid the big tax shift to homeowners, the Tax Board invented a "shelter
allowance." This is a dollar amount subtracted from the potential selling
price of a house. It makes residential assessments rise less. The Tax
Board also revised personal property regulations, so assessments of business
equipment and inventories would increase. Both these changes reduce the
tax hike for the average homeowner to about 13 percent. The tax cut for
the average business is down to 8 percent.
OK, it took a while, but what's the problem? The reassessment is underway
with regulations that (might) live up to the constitution.
What's the problem? Take your pick.
- The head of the assessors' association says most assessors won't
finish reassessment by March 1, 2002. That means counties, cities and
schools could have trouble setting tax rates and budgets for 2003.
- Business groups say they might challenge the constitutionality of
the shelter allowance. That would put us back in court.
- Indiana businesses have been trying to get rid of the property tax
on inventories for years. Most states don't tax inventories. The new
personal property regulations raise inventory assessments by about 50
percent.
- Indiana wants to attract new high-tech equipment investment. The
new personal property regulations increase assessments of the newest
equipment by 35 percent to 120 percent.
- The tax increase for the average homeowner is expected to be about
13 percent. It costs about $200 million in direct tax relief to homeowners
just to bring this average increase down to zero. Some homeowners will
homeowners with above average increases would cost more. Needless to
say, the state doesn't have $200 million-plus just sitting around.
Maybe we'll just let it all happen. Maybe we'll accept the tax hikes
for homeowners, live with the discouraging effects on business investment
and inventories, muddle through the local budget problems or fight it
out in court. More than likely, I'd guess, is that the General Assembly
will debate this issue long and hard in coming months.
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