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The Housing Crisis

Start a conversation pertaining to the failing real estate market and immediately homeowners inject escalating property taxes. To the Wall Street billionaire’s dismay, it is not the cost of borrowed money (rate of interest) that has resulted in the current housing crisis; it is property taxes. Lowering the Federal Funds Discount rate will not solve the U.S. housing problem as it ignites inflation, fuels burdening debt and further devalues the U.S. dollar.
The problematic housing market has multiple facets. First, many corporate employers implemented two-tiered labor packages. They required new workers to accept less pay and reduced retirement benefits for identical work. In addition, an influx of undocumented workers into the U.S. labor market provided an abundant supply of inexpensive labor while depriving domestic workers of higher wages. The result is less disposable income for home ownership.
Second, along the coastal storm paths, residential insurance premiums have risen as much as 400 percent from one year to the next.
Third, there is a glut of housing. Low-interest rates encouraged a speculative building boom. And, many of the 70 million baby boomers now desire to sell the big-box houses they called home. Plus, in better times, one million families purchased second homes each year. Those nearing retirement often own multiple homes. Soon, they will want to liquidate those structures, too, further fueling the oversupply.
Fourth, skyrocketing property taxes are the result of excessive municipal spending. Town governments spent more money than they collected. They mortgaged their community’s future by issuing municipal bonds. And in Indiana, to further finance their addiction to excessive spending, they lobbied the state legislature gaining approval to involuntarily annex and tax properties. Throughout Indiana, real estate taxes jumped 50 to 100 percent.
The U.S. housing crisis is the result of wage containment, higher insurance premiums, oversupply of housing and out-of-control municipal spending. The combination of these four factors has priced many homebuyers permanently out of the housing market.
Millions of taxpayer dollars are utilized to force annexation upon Indiana citizens. The main Hamilton County culprits annexing and forcing property taxes higher are the municipalities of Carmel and Fishers. In their quest to expand their tax coffers and finance their never-ending expansion, both towns have engaged in strong-arm tactics.
Without the approval of the Indiana General Assembly, municipalities would not have the authority to involuntarily annex property. Only a handful of state legislatures (Idaho, Indiana, North Carolina and Oregon) have sold out their citizens and granted town boards the authority to involuntarily annex property and levy additional taxes.
A candid and highly respected Indiana state senator told me, ‘The Indiana legislature is like a closed club. Traditionally, we take care of state business and the municipalities do their own thing. There exists an ‘old-boys agreement’, they (the towns) don’t mess with us and we don’t mess with them.’
Therein lies the problem ‘ politics ‘ and it explains why neither political party backs Gov. Daniels’ plan for permanent property tax relief.
Fearing voter outrage that recently unseated Indianapolis’ incumbent Mayor Bart Peterson, the Indiana General Assembly now proposes implementation of a quick-fix bill that will provide property tax relief for some homeowners but not all in 2008. Various proposals suggest ways to ‘temporarily’ lower property taxes. The proposals raise the state sales tax and county income tax. These illusions of property tax relief offer no long-term protection for Indiana’s citizens.
As outlined in Gov. Daniel’s plan, a change to the state’s constitution is required to protect the citizens of Indiana from the Indiana legislature. It is the current members of the General Assembly who failed to safeguard one of Indiana’s most cherished values: home ownership.
Homeowners, even those without mortgages, now realize they never truly own their homes. The moment they fail to pay the escalating property tax, they face an eviction process.
Gov. Mitch Daniels stated, ‘Any plan that makes a real difference in property taxation will have to go to its root cause, and that is excessive (municipal) spending. Today, no one (state or county) is responsible; each local taxing district sets its budget and sends you its part of the (property tax) bill, which is only added up when it hits your mailbox. I have prepared and will recommend to the legislature a proposal to cut every homeowner’s property taxes sharply and cap them forever, at no more than 1 percent of a home’s true value. This last provision must be added to the state’s constitution to ensure its permanence … ‘
Without a constitutional change, Indiana property owners will be under constant attack as special-interest groups lobby the legislature seeking funding for their projects. In the governor’s own party, many career politicians will attempt to weaken his legislation by retaining access to their never-ending supply of funding property taxes. Without voter support, both political parties will unite and prevent the governor’s plan from being fully implemented.
By geographic design, the state of Indiana is highly polarized, creating political pockets of Democrats and Republicans. This concept of ‘divide and conquer’ was the invention of the General Assembly. Once the opposing party’s selected candidate emerges from the spring primary, the incumbent is nearly always guaranteed easy re-election.
Thus, for property owners, the spring primary becomes the focal point. It is the primary that provides voters their only opportunity to remain loyal to their party while casting out failed politicians and giving fresh candidates a chance to lead and make their mark. Name recognition should not be the only voting criteria.
Regardless of their political affiliation, supporting the governor’s plan to amend the state’s constitution (by capping property taxes at 1 percent of a home’s true value) should be the rallying cry of every voter. There is only one way to support the governor’s tax relief plan and that is to surround him with legislators who openly support this change to the state’s constitution.
Currently, the state of Indiana is on a path of taxation without representation. It is time for the ‘good-old-boy legislature’ to be replaced. It is time to elect legislators who place the citizens of Indiana ahead of each town council’s grandiose agenda.
Andrew Robbins is a staff writer for CSMS Magazine and author of ‘It Took My Breath Away: One Man’s Experience May Save Your Life.’