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State passes tax-restructuring plan

The Indiana General Assembly passed a tax-restructuring plan last Friday night before the midnight deadline with the property tax crisis for the homeowners as their focus. The plan will provide additional tax cuts for homeowners this year and cap future bills for most property owners.
House Bill 1001 passed the Senate with a 41-6 vote and the House with a 82-17 count. Homeowner’s property tax bills will be cut an average of 30 percent statewide from last year.
‘I think the homeowners needed some relief,’ said Darrell Voelker, Harrison County’s Economic Development Corp. director.
To help fill the void from the property tax relief, the bill will increase the sales tax from 6 percent to 7 percent starting April 1.
The bill will also influx $620 million in additional homestead credits this year, $140 million in new homestead credits in 2009 and $80 million in 2010.
It will also provide a cap on property taxes, which will be fully implemented in 2010 with separate legislation amending the caps into the state constitution by 2012. Most homeowners’ tax bills will be limited to 1 percent of the home’s assessed value, with 2 percent on rental property and 3 percent on commercial (business) property.
‘Most of the people in Harrison County aren’t paying the 1 percent,’ said Harrison County Auditor Pat Wolfe. ‘There’s a few, but most aren’t.’
Wolfe said the plan only hurts those taxpayers under the cap because their property taxes won’t change and they will have to pay the increase in the sales tax.
The caps will save taxpayers across Indiana about $524 million in 2010, which is money schools and local government will not get.
‘I think we’re all worried about that,’ said Dr. Neyland Clark, superintendent of the South Harrison Community School Corp.
However, Clark added, ‘We’ve been running scenarios and it does not appear that it will have a major impact on us.’
Clark said the schools’ general funds, if the full cost is assumed by the state, could become an issue and the transportation fund will be difficult to continue to operate.
‘I’m still worried about the 1-percent cap for residences,’ said Voelker. ‘That cap doesn’t have any funding behind it. Who’s going to make that up?’
Voelker said it is too early to tell what the impact of the 3-percent cap for businesses will be.
‘When all is said, we’ll come out of it pretty good in Harrison County,’ he said.
But, on a statewide level, the 3-percent business cap sounds threatening, said Voelker.
The plan will provide $120 million immediately over the next two years to help offset the impact on schools.
Referendums will be required for building projects for elementary and middle schools that cost more than $10 million, and the same goes for high school projects costing more than $20 million. Clark said he can foresee the referendum becoming a problem, although no such plans for major construction are on the books at South Harrison.
Referendums also will be required for local government projects that cost more than $12 million or 1 percent of the taxing unit’s assessed value, if at least 5 percent of the unit’s registered voters or 100 voters or property owners petition for the referendums.
The duties of township assessors in townships with less than 15,000 parcels would be transferred to the county assessor, eliminating 966 township assessors, leaving 92 county assessors and 44 township assessors.
‘That’s what disappoints me the most,’ said Wolfe. ‘We lost the ability to vote at a local level for our township officials. Where’s your checks and balances?’
The bill assures property tax bills could not increase by more than 2 percent annually from 2007 levels for seniors with individual incomes of less than $30,000 or joint incomes of less than $40,000 if the value of their homes doesn’t exceed $160,000. It creates a new supplemental homestead deduction of 35 percent of the next $600,000 of assessed value after applying the standard deduction and 25 percent of remaining assessed value of $600,000.
The bill will allow counties to adopt new local option income taxes, which were available in 2007, but only 12 counties adopted the option. Harrison County voted against the option three times.
Other aspects of the plan include increasing renters’ deduction from $2,500 to $3,000; increasing earned income tax credit for lower-income workers; repealing several excess levy appeals and exemptions; and creating a ‘Distressed Unit Appeals Board’ that could assist taxing units facing at least a 5-percent reduction in tax collections.