Capping property taxes 

Editors note: The following stories are from students from Franklin College, who every year occupy the Statehouse, offering their stories to us, and thus to you.

Entering uncharted cap territory

By Julie Crothers

The constitutional amendment to cap property taxes that has passed the Indiana General Assembly and now awaits approval from Indiana voters may take the state into uncharted territory.

According to House Minority Leader Brian Bosma, R-Indianapolis, "There are a lot of states that have some type of property tax limitations in their constitution, but I don't recall that there were any models along the one that we creatively came up with here."

More than 30 other states have property tax caps in place, but few are as stringent as Indiana's, which would limit property taxes on homes to one percent, on farms and rental properties to two percent and on businesses to three percent. And the record for tax caps' effectiveness is mixed.

California voters approved their version of property tax cap legislation, Proposition 13, in 1978. Shortly after its adoption, California's education, healthcare, transportation and other public services dramatically declined. Their education system - which formally ranked as one of the top in the country, found itself positioned among the worst.

Similar to Indiana's legislation, the bill applied to all types of property, not just homestead property.

Proposition 13 set a maximum property tax rate at 1 percent of the value of the property. Once instated, the property could only be revalued upon a change of ownership. Though a benefit for commercial real estate, the consequences left holes in the equity and efficiency of the state's tax structure.

In nearby Michigan, legislation passed in 1994 set a tax cap at 5 percent or the current rate of inflation, whichever was lower. The result was an almost immediate reduction in property taxes for everyone in the state and a leveling of the playing field between school districts.

Public Information Officer for Michigan's Department of the Treasury Terry Stanton said with the tax reductions came an increase in sales tax and a round of deep budget cuts from local government entities.

"At a time when many people were being forced out of the state by property taxes, the caps provided much needed relief," Stanton said.

A report issued by the Center on Budget and Policy Priorities stated parts of Massachusetts have had to lay off local employees, including fire and police, while freezing wages and shutting down town libraries and community centers in order to comply with the state's Proposition 2 ½, similar to the effects of California's Prop. 13 initiative.

Massachusetts' law mandated property tax revenues not exceed 2.5 percent of a community's assessed value and that a community's property tax revenue not grow by more than 2.5 percent a year.

Other states are far less restrictive in their property tax laws.

Tennessee's caps, for example, only apply to senior citizens.

In West Virginia, statewide property tax caps - much like Indiana's proposed constitutional amendment - depend on the type of property, but also where it is physically located. Once the caps were in place, beginning in 1932, flexibility in the amendment's language regarding West Virginia's property taxes allowed the caps to be exceeded if approved by the people.

As of 2008, caps on residential, farm real estate and all other properties in and outside municipalities have been exceeded.

Sen. John Broden, D-South Bend, said he's concerned Indiana could face similar challenges without added flexibility to the tax cap legislation.

"There was certainly a great deal of heat on policy makers to do something. They could not eliminate property taxes because the alternatives were too daunting and would be equally unpopular with voters," Broden said.

However, Broden is confused at why legislators would vote to place the caps in the state's constitution before giving them a trial run through the end of 2010.

"At this point, we really don't know who the winners and losers are and I don't think that's clear right now among taxpayers," he said.

A plea for state sovereignty

By Katie Coffin

Rep. Jackie Walorski, R-Jimtown, presented her resolution to about 40 supporters Wednesday morning that would claim Indiana's sovereignty under the Tenth Amendment.

House Concurrent Resolution 10 says that "the states are demonstrably treated as agents of the federal government" and "many federal laws are in direct violation of the Tenth Amendment to the Constitution of the United States." The resolution also calls for federal legislation deemed in violation of the Tenth amendment be "prohibited or repealed." Walorski said 14 other states have similar legislation.

"[The resolution] basically guarantees the sovereignty of the state of Indiana so that as we see these unprecedented mandates happening at the federal level... that we basically say together as a state that the time of this is over," Walorski said. "The federal government is usurping the state's authority, and by doing that they're usurping our authority as citizens."

Sen. Marlin Stutzman, R-Howe, supports Walorski's measure. "Right now, federal government continues to reach further and further, taking over the responsibilities that the states have specifically in the Constitution," Stutzman said.

However, Rep. Russ Stilwell, D-Boonville, said he doesn't think legislation is worthy to come to the floor unless "it's slowly vetted in a committee to make sure it is reasonable enough to come for a vote."

"Maybe she (Walorski) is running for Congress more than she is serving in the state legislature," Stilwell said. "I don't know if that'd be the case, but it might be indicative of that."

Sunday beer. Almost.

By Mitch Downs

Senate Bill 75, which would allow for Sunday carry-out by microbreweries, is one step closer to becoming Indiana law.

"This bill would allow (microbreweries) to sell their product that they brew on the premises," said Sen. Vi Simpson, D- Bloomington, a sponsor of the bill.

Sen. Ron Alting, R- Lafayette, said this would be for tourists who come to Indiana to see how the microbreweries make their beer. Tourists would be able to take some brew home with them if the bill becomes law, said Alting.

"This is a bill for small business," said Alting. "We don't have a lot of them... This is about Indiana. This is an Indiana product, it employs Indiana people, (and) it's made in Indiana."

There is a trail of microbreweries in Indiana that many tourists travel along to learn about the brewing process and taste the products, said Simpson. SB 75 passed, 41-9, and will go to the House next week.

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