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Issue Position: Property Taxes

Issue Position

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Issue Position: Property Taxes

Building on the state's three straight years of balanced budgets, Governor Mitch Daniels has proposed two major steps to further strengthen Indiana's protection of taxpayers.

First, the governor called for final legislative passage of a constitutional amendment to make permanent the caps on property taxes contained in the landmark tax cut bill approved during the 2008 session of the Indiana General Assembly. Second, the governor proposed sending taxpayers a refund in the years when state revenues exceed those necessary for a balanced budget and rainy day reserves.

The governor's property tax package, HEA 1001, received overwhelming bipartisan support (119- 27).Among its provisions, it limits property taxes to 1 percent of the value of a home, 2 percent of agriculture land or rental property, and 3 percent of any other business beginning in 2010 (phased in starting next year). Daniels said achieving permanent property tax protections for homeowners and other taxpayers would be his top priority for the 2009 legislative session.

Homeowners all over the state are beginning to reap the benefits of the governor's property tax plan. So far, the average property tax reduction is about 38 percent compared to 2007 taxes.

A constitutional amendment must be approved by two separate sessions of the General Assembly before it can go to a popular vote. If legislators approve SJR1 again during the 2009 session, Indiana voters would have the opportunity to consider the caps in the November 2010 general election.

"We've taken the first of what must be three steps to make the caps permanent and constitutional. The legislature has voted once to submit this to a referendum of the people. A second vote under our law must occur, and then you the people get a chance to vote," said Daniels, during a luncheon speech before members of the Rotary Club of Indianapolis. "I'm very confident that if the people of Indiana get that chance, they are going to vote to lock in these caps and this unique-in-America protection. We have to make sure that that vote happens, and that it comes soon."

The second proposal, the Automatic Taxpayer Refund, would ensure that any tax revenues beyond those needed to maintain a balanced budget and adequate rainy day reserves be sent back to taxpayers in the form of a refund.

In years when state revenues are above an agreed level needed for fiscal sufficiency (for example, 10 percent of the next budget), the surplus amount would be returned to taxpayers on a per capita basis in the form of a credit on their next income tax filing. The state auditor would be responsible for certifying that the amount of total financial reserves, which consist of the General Fund, Rainy Day Fund, Medicaid reserve and School Rainy Day Fund are above the agreed level.

"The state would collect only what it needs to provide essential services, to protect itself against a downturn and to have an adequate reserve. Above that, the money stays with the taxpayer to be spent on family needs and to be reinvested in a growing economy," said Daniels.

The plan would require the approval of the General Assembly.

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