Sunday, July 22, 2007

Sunday lead story in JG is completely wrong

Please check out the lead story in Sunday's JG:

Basically the story talks about the 24% increase in property taxes that was expected statewide.
The story lays the blame at the State level. The story is wrong.

Lets start with how property taxes are calculated:

Each government entity that levies property taxes submits a budget to the Indiana Department of Local Government and Finance. The budget is almost always approved and sent back. Each County then calculates the total levy due. This is a dollar amount based on the total of every budget submitted.

The County then calculates the total assessed value of property and calculates tax rates for each geographical district.

Per the JG article the expected 24% increase Hoosier Homeowners were expected to see was due to:

1. 6.1% baseline spending by local governmental units and schools. This is clearly the doing of local Government.

2. 3.7% is due to the final elimination of the Inventory tax. The inventory tax was a terrible tax that was levied on Inventory in Indiana. Indiana has finally abolished that tax as they should have long ago. The State of Indiana gave local units of Government the option of making up the loss of revenue by either increasing property taxes OR by increasing income taxes. Per the story 43 Counties chose to raise income taxes to cover the revenue loss and the remaining Counties chose to increase property taxes. So the local governments had the choice of either increasing property taxes OR increasing income taxes. I do not see how those counties who chose to increase property taxes can blame the State of Indiana for their local decision.

3. 3.7% reduction of State support for property tax relief. This is clearly something local Governments can blame the State for.

4. 10.5% due to trending. Basically what happened is that Assessors now have to base property assessed values on market value and they have to trend these items each year. This year they are trending for 1999-2005, there are six years being handled right now.

All trending does is force Assessors to update the property values of all property parcels in their jurisdictions. Increasing the assessed value of property does NOT raise property taxes. Come on. It is simple math...

When tax rates are calculated the total assessed value and the total assessed levy (in dollars) is used. When the total assessed value INCREASES due to trending guess what happens to the tax rate? Yep, it goes DOWN.

You could argue that trending may shift the tax burden among the following groups: Agricultural property, Commercial Property, and Residential property. You cannot argue that trending increases property taxes.

The JG story is saying that Hoosier homeowners are seeing a 10.5% increase due to trending and I find this hard to believe. If it is in fact true then that could only mean that residential properties were undervalued prior to trending or that agricultural and commercial properties were over-valued. This would of course be the fault of local Assessors IF true.

Based on the study the JG quoted here is where the fault lies:

Local Government
6.1% increase in local spending
3.7% elimination of Inventory Tax
10.5% increase on homeowners due to trending. This increase is only possible if the assessed
values of homes were far too low in comparison to agricultural and industrial property.
Trending does NOT increase property taxes; it may shift the burden between the various
types of property owners. If the original assessed values were wrong then that is obviously
the fault of local Government because they have been overcharging agricultural and
commercial properties prior to trending.

State Government
3.7% reduction of State support for property tax relief

The truth is that both the State Government and the local Governments have collaborated to screw up our tax system; however, the increase in property taxes over the past decades is due to local government spending.

The ONLY answer is to split the two from each other so that they stop pointing their fingers at each other; otherwise, we will keep hearing "It is their fault."

Mike Sylvester


Jennifer Jeffrey, Chair LPAC said...

Very nice Mike. Thank you for the information!

Bobby G. said...


Glad you're here to tell these state & city governments that it's NOT polite to "point".