The neverending saga continues...
Date posted online: Wednesday, April 04, 2007
Panel advances property tax overhaul
Huge plan tied to slots at horse tracks
BY PATRICK GUINANE
INDIANAPOLIS | A key Senate panel barreled ahead Tuesday with a dramatic makeover of local government finances that supporters say will send homeowners immediate and lasting relief from smothering property taxes.
Local officials would get some financial breathing room as well, but only if they shift spending to an income tax -- a remedy the Lake County Council has shunned for more than three decades.
"They need to go raise the income tax," Senate Tax Chairman Luke Kenley, R-Noblesville, said following a nearly four-hour hearing on his property tax plan.
It's a suggestion many state lawmakers have made, given that Lake often cries broke despite being one of only two of Indiana's 92 counties without an income tax. The cries have grown louder since the General Assembly approved a circuit breaker to cap all tax bills at 2 percent of property's assessed value.
To ease the cap's burden on local governments, Kenley would raise the cap to 3 percent for businesses and landlords.
"I was afraid they wouldn't pass it on to tenants," Kenley said.
The revised circuit breaker, now part of House Bill 1478, cuts projected local government losses statewide by more than two-thirds -- from $426 million to $139 million. Porter County, for instance, wouldn't lose a cent under the lower wattage circuit breaker.
But the cap still would zap a combined $126 million from cities, schools and other taxing units in Lake County. Kenley suggests county officials ease that pain by approving a 1 percent income tax, which would raise $76 million.
Kenley considered forcing local governments to finance all new spending with a county income tax but ultimately decided against it.
Cities and towns, which continue to plead for more money, could only get relief if their county approves a new income tax. Kenley's plan allows for a tax increase of up to 0.5 percent to fund police, fire and other public safety needs.
Another new element in Kenley's plan is a homestead credit aimed at cutting homeowners' tax bills by 5 percent yet this year. That one-time break relies on lawmakers approving separate legislation that would legalize slot machines at downstate horse racing tracks, bringing the state an $800 million windfall.
The Senate Tax and Fiscal Policy Committee advanced Kenley's tax plan 12-0, but House Democrats -- needed to approve any eventual solution -- expressed reservations. The chief concern centers on a move to end $2 billion in payments to local governments and have the state use the money to assume some local school and welfare costs.
"I think major portions of it will pass," Sen. Sue Landske, R-Cedar Lake, said after voting Kenley's plan out of committee. "Everyone is clamoring for property tax reform."
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