Property Tax Cap's Influence On Local Governments

By Max Resnik

October 22, 2010 Updated Oct 22, 2010 at 6:10 PM EDT

FORT WAYNE, Ind. (Indiana's NewsCenter) On November 2nd Hoosiers will have the opportunity to change the Indiana Constitution. It is a process that takes five years, but could be completed in less than two weeks.

If a simple majority passes the Property Tax Referendum, homes, businesses and agriculture will see caps placed on their property taxes. For homes it's a one percent cap. For businesses it's a two percent cap. For farms, a three percent cap.

One question that has been raised in regards to the referendum, which polls show is likely to pass, is what happens to local governments? How will local governments make up the revenue they typically see on property taxes?

According to Dr. Larry DeBoer, Professor of Agricultural Economics at Purdue University who spoke today in Bluffton, local governments will more than likely need to increase charges and fees on things like fire hydrants and trash pick up. There could even be charges to community members on things like the community pool. Other avenues to make up the possible loss in revenue could be lobbying the legislature to ask for looser rules on local charges. They could propose additional referenda or even try to raise local income taxes.

Supporters of the Property Tax Referendum say this is a good opportunity for local governments to become more efficient in their everyday duties. Supporters also say local governments will be able to offer services to the community at a lower cost.

It is possible that school districts and pubic libraries could consolidate to cut down on costs. It is also a possibility that certain levels of government, like townships for example, could be eliminated.

A December 2009 Ball State University poll on the issue showed 64 percent approval for the measure. In addition to the poll, opponents of the tax cap haven’t waged any sort of campaign to fight the measure.

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