Property Tax Relief

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The Indiana General Assembly and Governor must be told that genuine property tax relief requires that budget items currently paid for by property taxes must in the future be paid for by income taxes.

Most persons calling for increased local income, sales, and other taxes to offset property taxes do not ELIMINATE any of the budget items supported by property taxes. The end result for Hoosier working families would be temporary property tax relief in return for permanent increases in other taxes.

An example of temporary property tax relief in return for a permanent tax increase is the December 1, 2002, state sales tax increase from 5% to 6%. Many Indiana General Assembly members mislead Hoosier working families into believing that the sales tax increase would be used to lower homeowner property taxes. But, the real truth is that Indiana General Assemblies and Governors, through their betrayal and incompetence, have turned a promised 16.3% homeowner property tax reduction in 2003 into a 20.3% increase in just four years a promised 16.3% homeowner property tax reduction in 2003 into a 20.3% increase in just four years. Details of this alarming development can be found at http://finplaneducation.net/betrayal_incompetence.htm.

Genuine property tax relief results when budget items covered by property taxes are eliminated and replaced with budget items paid for by income taxes. Below is the Watchdog Indiana 14-Point Proposal for Genuine Property Tax Relief. Listed next is what the budget items for Lebanon, Indiana, would be like if the 14-Point Proposal was already in place and Lebanon residents represented the average Hoosier.

The property tax would be eliminated on real property owned by Lebanon individuals, partners, stockholders in subchapter S corporations, trusts, estates, and nonresidents with income from sources in Indiana. The eliminated property tax revenue would be replaced by a County Individual Income Tax Rate of 0.6822 percent and a School District Individual Income Tax Rate of 4.0258 percent. The state individual income tax rate would be reduced from 3.4% to 1.7%. The 1% Boone County Option Income Tax would remain in place.

The property tax would continue to be imposed on the real and personal property of Lebanon businesses and utilities. About 30 percent of the property tax would continue to be imposed while the 70 percent of property tax on real property owned by Lebanon individual income tax payers would be eliminated.

Lebanon, Indiana, County Individual Income Tax Rate Charged for Year 2006
(percent rate of taxation on state taxable income of Boone County residents)
0.3421 County General
0.0798 Family & Children
0.0114 Child Psych Res Treat
0.0228 Welfare HCI
0.0114 Medical Asst Wards
0.0114 Co Childs/Spec Health
0.0228 Board of Health
0.0114 County Park
0.0114 4-H Maintenance
0.0114 Reassessment
0.0455 Cumulative Bridge
0.0228 Hospital Cum Bldg
0.0228 Cum Cap Develop
0.0228 Mental Health
0.0324 County Rainy Day Fund
0.6822 Total County Individual Income Tax Rate

Lebanon, Indiana, School District Individual Income Tax Rate Charged for Year 2006
(percent rate of taxation on state taxable income of Center, Perry, and Worth Township residents)
0.0195 Center Township Tax
0.0683 Center Township Poor
0.0787 Center Township Firefighting
0.0083 Center Township Rainy Day Fund
0.0004 Perry Township Tax
0.0035 Perry Township Firefighting
0.0001 Perry Township Rainy Day Fund
0.0012 Worth Township Tax
0.0007 Worth Township Poor
0.0178 Worth Township Firefighting
0.0204 Worth Township Debt Service Fund
0.0020 Worth Township Rainy Day Fund
0.2209 Total Townships Rate
0.9210 School General
0.8409 Debt Service Fund
0.3845 Capital Projects
0.1855 Transportation
0.0284 Pre-School Spec. Educ.
0.0448 Bus Replacement
0.0409 Ret/Sev Bond Debt
0.1223 School Rainy Day Fund
2.5683 Total School Rate
0.0586 Library
0.1467 Lease Rental
0.0097 Cap. Projects-Leb. Lib
0.0107 Library Rainy Day Fund
0.2257 Total Library Rate
0.6514 Corporation
0.0122 M V H Fund
0.0738 Park & Recreation
0.0220 Sanitation Fund (Lebanon)
0.0493 Cum. Cap. Development
0.0142 Police Pension Fund
0.0524 Fire Pension Fund
0.0875 Storm Water Mgmt.
0.0481 Corporation Rainy Day Fund
1.0109 Total Corporation Rate
4.0258 Total School District Individual Income Tax Rate

Lebanon, Indiana, Property Tax Rate Charged for Year 2005 Payable in Year 2006
(rate of taxation on each one hundred dollars of Lebanon business and utilities assessed valuation)
0.3000 County General
0.0700 Family & Children
0.0100 Child Psych Res Treat
0.0200 Welfare HCI
0.0100 Medical Asst Wards
0.0100 Co Childs/Spec Health
0.0200 Board of Health
0.0100 County Park
0.0100 4-H Maintenance
0.0100 Reassessment
0.0400 Cumulative Bridge
0.0200 Hospital Cum Bldg
0.0200 Cum Cap Develop
0.0200 Mental Health
0.5700 Total County Rate
0.0200 Township Tax
0.0700 Township Poor
0.0900 Total Township Rate
0.8075 School General
0.7373 Debt Service Fund
0.3319 Capital Projects
0.1626 Transportation
0.0250 Pre-School Spec. Educ.
0.0394 Bus Replacement
0.0360 Ret/Sev Bond Debt
2.1397 Total School Rate
0.0600 Library
0.1500 Lease Rental
0.0100 Cap. Projects-Leb. Lib
0.2200 Total Library Rate
0.8144 Corporation
0.0153 M V H Fund
0.0924 Park & Recreation
0.0276 Sanitation Fund (Lebanon)
0.0618 Cum. Cap. Development
0.0179 Police Pension Fund
0.0657 Fire Pension Fund
0.1096 Storm Water Mgmt.
1.2047 Total Corporation Rate
4.2244 Total Property Tax Rate

Watchdog Indiana 14-Point Proposal for Genuine Property Tax Relief

1. Eliminate the property tax beginning in 2009 on real property owned by individuals, partners, stockholders in subchapter S corporations, trusts, estates, and nonresidents with income from sources in Indiana. All other real and personal property tax will continue to be imposed (on businesses and utilities primarily) in accordance with current law.

2. Eliminate the State Homestead Credit and the State Property Tax Replacement Credit beginning in 2009. The revenue used to provide these credits will be redirected to the state's general fund.

3. Reduce the state individual income tax rate beginning in 2009 from 3.4% to 1.7% to offset the eliminated State Homestead Credit and State Property Tax Replacement Credit (the calendar year 2006 State Homestead Credit and State Property Tax Replacement Credit total of $2.173732 billion is about half the fiscal year 2006 individual income tax less amnesty payments total of $4.322292 billion). The $12.586 million of eliminated credits that is not offset by the reduced income tax rate can be used to help remove the State Fair and State Forestry from property tax support.

4. Remove the State Fair and State Forestry from property tax support and have their budgets covered by the state general fund.

5. Apply the 2% Circuit Breaker Credit to all real and personal property beginning in 2009 instead of 2010 to help protect those property tax payers who will lose the State Property Tax Replacement Credit.

6. Beginning with the budgets for 2009, have the Department of Local Government Finance review the budgets of political subdivisions and certify its actions by November 15 of the preceding year in accordance with the provisions of Indiana Code 6-1.1. Beginning in 2009, both property tax rates (for businesses and utilities primarily) and individual income tax rates will be computed to provide the revenue needed for the approved political subdivision levies. Annual property tax rates will vary according to the approved property tax levy and the total assessed value of taxable property in the political subdivision. Variable annual individual income tax rates will be determined by the approved individual income tax levies and the prior year's total state taxable income for individuals in the political subdivision (example: 2009 political subdivision individual income tax rates certified on November 15, 2008, will be the approved 2009 individual income tax levies divided by the 2007 total state taxable income for individuals in the political subdivision).

7. For only those 2009 budgets where the 2% Circuit Breaker Credit for property tax applies, a political subdivision may transfer the property tax shortfall to the portion of its budget covered by individual income tax rates. For all other budget years, reduced property tax collections from the 2% Circuit Breaker Credit cannot be transferred to the individual income tax budgets and will result in reduced budgets for the affected civil taxing units and school corporations.

8. The portion of any County Option Income Tax (COIT), County Economic Development Income Tax (CEDIT), and County Adjusted Gross Income Tax (CAGIT) directly allocated to property tax relief will be discontinued and the corresponding income tax rate reduced accordingly.

9. The DLGF will annually approve two variable local income tax rates for each individual with income. One rate will be for county-wide budget items. The other local income tax rate will be for school districts. City levies, town levies, township levies, library levies, and school levies will all be included in the appropriate school district tax rate.

10. A local taxing unit’s maximum permissible tax levy will continue to be equal to the previous year’s maximum levy minus one-half of any unused levy authority, then increased by the six-year average growth in Indiana nonfarm personal income. A unit can still appeal to the DLGF for increases in maximum property tax and individual income levies if its assessed value growth exceeds the statewide AV growth by at least 2% and for the types of relief under IC 6-1.1-18.5-13, -13.6, and -16. The DLGF can still grant permission to a school corporation to raise its levies in excess of limitations for the types of relief included in current law.

11. Distribute local individual income taxes to the local taxing units by June 1, October 1, and February 1. For example, 2009 local individual income taxes will be distributed 06/01/2009, 10/01/2009, and 02/01/2010. If the individual income tax in any of the three annual distributions is more than 33.3 % of the annual DLGF approved levy, the excess revenue will be deposited in the local taxing unit's Surplus Income Tax Fund. The local taxing unit may use its Surplus Income Tax Fund to augment any of its DLGF approved levies after February 1, 2010.

12. The annual local individual income tax budget approved by the DLGF for each political subdivision must include a Rainy Day Fund that is 5% of the total of all other local individual income tax budget items. This Rainy Day Fund can only be used up to the amount that any of the three annual local individual income tax distributions is less than 33.3 % of the annual local individual income tax levy. Any excess revenue from a distribution must be used to restore any deficits in the Rainy Day Fund before it is expended from the Surplus Income Tax Fund.

13. The two DLGF-approved variable local income tax rates for the average individual income tax payer will total 4.7080%. This assumes that 70% of the total statewide property tax levy will be shifted to individual income tax payers. (The total statewide calendar year 2006 property tax levy is equal to the $5.875492 billion net property tax levy plus the $2.267587 billion State Property Tax Replacement , State Homestead, and Local Homestead credits together with the $0.407153 Rainy Day Funds.)

14. Beginning in 2009, replace the $2,500 individual income tax Renters Deduction with a Renters Deduction equal to the property tax paid in 2008 by the average homeowner statewide.

This page was last updated on 03/19/10 .