2024-Property taxes
PROPERTY TAXES - Everybody's favorite topic that no one understands
After weeks of study (which why this is so difficult is still beyond me), I think I finally have most of the story, or at least enough to convey to voters.
In a nutshell:
Property tax assessment rules are set by the legislature.
The Republican SUPERMAJORITY set the current rules in 2016 to be based on a complex market value formula.
The lowered interest rates of the pandemic caused property values to soar which is causing your market value to soar and your taxes to go up.
Democrats have proposed revising the formulas and giving temporary relief with a $56K homestead exemption for ALL homeowners which has been buried in committee by the Republicans.
Republicans take credit for passing relief for seniors and disabled vets which in actuality did very little for very few.
The in depth understanding:
There was an Indiana constitutional amendment passed which capped property tax to 1% of homestead value, 2% of other residential (rental) and farmland, and 3% of everything else. That was passed in 2010.
Property assessments are calculated by the local county assessor's office per a guide which the Department of Local Government Finance (DLGF) puts together based upon the statutes that the Indiana legislature puts together. I'll come back to this.
Originally, assessments were based on "reproduction value," which was the value to restore the property to its state if it was lost. Due to a lawsuit in the late 1990s, this was changed in about 2001 to go to "replacement value." The difference was that an older building (say a house from the 1890s) would not be rebuilt with 1890s materials and would be replaced with a building made of new materials.
In 2013, there was another Indiana Supreme Court case from Lake County which decided that "replacement value" was unfair and told the legislature that "market value" was the fair way to assess property. After the lawsuit, the legislature, by then a Republican supermajority, came up with the calculus to figure property values. We adopted a three "approaches" to calculate market value: cost, sales, and income values. The cost approach is based on "if you buy comparable land and made it the same as this land." The sales approach is the most commonly used approach for residential property. It takes recent sales of comparable properties to set market value. The income approach is the most common for agricultural land and businesses. It takes into account what the value would be to a buyer given what income can be made from the property. This was all summarized in the guide given to the county assessors along with the formulas to figure each approach (if you download and look at this you will agree that people need to stop attacking algebra!!).
So what happened after that? In 2020, the Fed cut the interest rates drastically in response to COVID to keep the economy from tanking worse than it did. Among the effects of this, mortgage loan interest rates dropped, meaning people could afford to pay more for the same house at the same monthly payment. This drove the sales values up drastically. In depth assessments are not done every year for property. There are basic "rate of inflation" increases every year, but every four years are when properties have in depth reassessments. And that is where we are now. The new sales data is affecting property values drastically which is causing property taxes due to soar.
One thing that is actually great and every voter needs to know about is that there is an appeal that can be filed to force the assessors to reassess the property value.
Now what has been proposed and what has been enacted about this drastic increase to Hoosiers?
The Democrats in the House proposed to give every Hoosier homestead a $56,000 homestead exemption (amounting to $560 off the final tax bill if they were taxed at the full 1% rate) as temporary relief while we reexamine and adjust the calculus of figuring market value. This was buried in committee and never received a hearing.
The Republican supermajority enacted a few measures, but as you will see, they did virtually nothing.
They gave seniors a $200 property tax credit, IF THEY WERE NOT RECEIVING ANY OTHER CREDIT. Which most were, so it benefitted virtually no one.
They gave disabled vets an assessment cap of $240,000. How many disabled vets own a $240,000 house? Very few, so it benefitted virtually no one.
Reduced the taxable value of gazebos, patios, and pools.
Allowed counties to exempt manufactured homes and limit increases IF THEY DESIRED.
The only truly good thing that was passed was that if a reassessment is done on appeal and it comes back that the property is actually worth more, the lower value must remain the assessed value.
Additionally, there was another law that passed in 2020 and set up what is referred to by the DLGF as the "2021 Rule." It is incorporated into the guide, but NO ONE can tell me what changed. The link on the DLGF's website to define the rule is a dead link. No assessors OR legislators have been able to tell me what it is.
I hope that gives you some better idea of what has happened with your property taxes. Also, I hope that it gives you food for thought when you go to vote in November. Yes, I am running as a Democrat to be your state representative. I am standing against this nonsense of our legislators doing nothing to provide relief to our citizens because they are in a comfortable majority where they can exist without challenge to their rule.
