Vote to make tax cap part of Constitution: good or bad idea?


Along with all of the candidates for office on this Tuesday’s election ballot, voters will also find an issue concerning the creation of a Constitutional Amendment aimed at capping taxes paid by homeowners.

On the surface, that sounds like a great idea to property owners, but several state organizations, such as the Association of Indiana Counties and Indiana Farm Bureau are urging voters to vote ‘no’ on the issue.

Currently a state statute exists that caps tax bills on various pieces of property. If Tuesday’s issue is passed, that statute will become part of the Indiana State Constitution.

The matter would cap taxes in the following ways:

– A one-percent cap for homestead properties. This is the taxpayer’s principal residence.

– A two-percent cap for residential properties. This would be homes or apartments that a person owns, but is not their principal residence.

– A two-percent cap for agricultural land. This would be farmland that is used in the production of food and/or farming operations.

– A two-percent cap for long-term care facilities. This would be facilities like nursing homes.

– A three-percent cap for non-residential properties. This would be commercial properties, such as business buildings and stores.

– A three-percent cap for personal properties. This would be personal property items, such as equipment, that is owned by an individual.

Based on that, Switzerland County auditor Rachel Schuler says that many property owners may quickly vote ‘yes’ on the amendment, thinking that it would in essence ‘cap’ their property taxes, so they would never go above a certain amount, or that they would stay where they are at the current time.

“What people need to realize is that those caps don’t assessed valuation into account,” Rachel Schuler said. “The cap doesn’t mean that your taxes aren’t ever going to go up. It means that the most you could pay on your principal residence is one percent of your assessed valuation.”

In other words, if you own a home worth $100,000 the most property tax that you could pay is one-percent, or $1,000.

But should the assessed valuation of the property rise, and that is based on several outside factors that a homeowner or landowner can’t control, then the property taxes are going to rise, as well.

Should that home be valued at $200,000, then the property tax could go to $2,000.

Switzerland County saw the assessed valuation of property rise sharply when Belterra Casino Resort and Spa came here. As other business and industry locates here, the value of the property of everyone in the county is going to increase.

That’s where the cap could be a severe hit to property owners here, particularly farmers and business owners.

“It’s true that people won’t ever pay more than that, but it won’t keep the assessed valuation from increasing,” Rachel Schuler said. “Right now I would estimate that less than five percent of the property owners in this county pay one percent of their total assessed valuation in property taxes. The rest are paying less than that. We don’t have very many people who have reached that one percent cap, but if this becomes part of the constitution, I feel like we’re going to see a lot more property owners get to the one-percent.”

Those who could really be impacted by this becoming part of the Constitution, according to Rachel Schuler, are farmers and business owners – who pay personal property taxes on equipment and inventory.

“Look at all of the equipment that a farmer has; or the equipment inside a small business operation,” Rachel Schuler said. “If people hit the cap limit, it would be a terrible hit for them.”

Rachel Schuler said that voters need to be very careful when considering this issue, noting that although it’s already in place as a state statute, there are more ways for the state legislature to make emergency adjustments should they become necessary.

But if it is part of the Constitution, making those emergency adjustments could be nearly impossible.

“We’re getting ready to do another assessment that will end on March 1st, 2012,: Rachel Schuler said. “How will the market go in the next two years? No one knows, but property values may increase a lot. That’s why people need to be very careful with this vote.”

And the feeling of the Switzerland County Auditor on this matter?

“Personally, I don’t think it’s a good idea,” Rachel Schuler said.