Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

The 2023 ForecastThe reason for worry about a recession is the Federal Reserve’s response to high inflation.

Some Labor Market Facts You Won’t Read ElsewhereIndiana is simply not producing a 21st century workforce.

Three Types of Public DebtAll types of public debt are effectively transfers of wealth from the future to our present selves.

Remote Work Is Indiana’s Biggest Opportunity and RiskThere are now more Hoosiers in remote work than there are in manufacturing and logistics combined.

View archives

Top Tags

jobs and employment 225
economics 173
education 144
economic development 141
taxes 122
state and local government 119
finance 107
recession 100
budget and spending 98
indiana 96
Browse all tags
Reporter / Admin Login

July 11, 2003

Rhetoric Meets Reality in Indiana Property Tax Reform

Years ago economist David Friedman came up with an idea for property tax assessment that is probably too simple -- and too beautiful -- to ever be put into practice.  It's called self-assessment.  Every property owner would be allowed to come up with his or her own dollar value on the worth of their property.  But there's a catch.  If someone offers them that sum of money, they have to sell it.

Don't want to move?  Then you'd better put a high dollar amount down on your tax form. In the blink of an eye you put a thousand tax assessors out of work, save a forest of trees cut down to print assessment manuals, and create a system that cannot possibly be called unfair by taxpayers, because they're the ones who control it.

Okay, now it's time to wake up.  Property tax reform in Indiana is nothing quite as radical as that.  And no one would ever call it beautiful.  But it's a reality that, even in its still-born, incomplete stage, millions of taxpayers are beginning to understand.

If the rumblings of newspaper letters are any guide, many are not happy with the result. That was the fear of many  legislators, who voted to lessen the pain by shifting half of the school levy from the property tax in the historic House Bill 1001, passed in 2002.  That cut, along with increases in other exemptions and credits, allowed them to claim that the impact of court-mandated reassessment on average property tax burdens would be very small.

Those of us who read Purdue Universityeconomist Larry DeBoer's 1996 study on market value-based assessment had to bite our tongues at that point.   If that study proved anything, it was how many questions had to be answered before we can know how changing assessment methods will impact any given homeowner's final bill.   As taxpayers across the state are in the process of discovering, the impact of restructuring and re-assessment on property tax bills on average, and on their own individual bills, are two separate things entirely.

So it is that owners of older homes, rental property, and residents of areas of the state where old assessment procedures were wildly at odds with market value, can expect to be hit up for more money when their now overdue tax bills finally arrive.

Could that outcome have been avoided?  No, in all likelihood.  Could it have been communicated more effectively to taxpayers?  Perhaps.  But voters have a habit of killing messengers who give them bad news, and few leaders wanted to take that risk.

But the complexity of the issue made it hard for even the best-informed voters to follow. That same complexity, and the loss of control taxpayers feel over their final tax bills, has helped the property tax retain its dubious distinction as the most loathed tax in the state.

At the top of the list is the levy method of setting rates.  Guaranteeing a steady, predictable revenue stream from the property tax makes schools and local governments happy, but turns individual taxpayer bills into a crap shoot.  It makes other taxpayers, not government, pay for actions that reduce the tax base.  And in today's low inflation environment, it allows for an expansion in the size of local government with little or no voter input.

Most legislators would rather kiss a pig than vote again on anything as significant as HB 1001 right away.  Will voters and taxpayers allow that to happen?

Link to this commentary: https://commentaries.cberdata.org/363/rhetoric-meets-reality-in-indiana-property-tax-reform

Tags: taxes


About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He has been involved with economic forecasting and health care policy research for over twenty-four years, both in the private and public sector. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. He attended the University of Michigan, receiving a B.A. ('79) and Ph.D. ('86) in economics.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close