Differential Property Tax Caps and the Indiana Constitution (Why We’re Still Opposed)

Late last summer, the Indiana Chamber tax policy committee revisited the issue that is currently being debated again by the newly elected General Assembly. Should the 1%-2%-3% (of assessed value) tax caps be enshrined in our Indiana Constitution? Based on a policy position that has been in place for many years, the Chamber opposed SJR 1 last year, and the committee concluded that there is no reason to change that well-founded position.

So, what’s so bad about tax caps? Nothing if they were the same for all taxpayers. But the fundamental problem here is that the caps are different for different taxpayers. The resolution to change our Constitution (SJR 1) proposes replacing the language that says that all taxpayers will be guaranteed assessments and tax bills that are “uniform and equal” with language that says properties with equal market values will be taxed differently based on how the property is used. The 1%-2%-3% caps establish a “classified” property tax system. This is what our longstanding position opposes. A review of other states’ property tax structures reveals that classified systems serve as a means to tax business property at a higher rate, and therefore higher burden, than other property types.

This is the root of our opposition.

We believe that the founding fathers of our state got it right when they worded our Constitution to say that property of equal value will be assessed and taxed the same regardless of how the owner chooses to use it. In the simplest terms, what the proposed constitutional amendment would do is to sanction, endorse and make permanent a system that says owners of business commercial and industrial real property, and business personal property (machinery and equipment) can and will be taxed up to three times greater – merely because it is used for business purposes – than what some other property owners will be taxed on equally valued property. Is this something the Legislature and the citizenry should be supporting? Is this the message we want to send in difficult economic times to those considering whether to expand their operations in Indiana? Continue reading