U.S. Sen. Evan Bayh has introduced a bill that he says would lessen the blow of recent property-tax increases for nearly 1 million Hoosier homeowners.
The legislation, which also is advancing in the U.S. House with the help of downstate U.S. Rep. Baron Hill, would give a break to those who pay property taxes but don't itemize deductions on their federal income taxes.
Bayh said he and Hill have been besieged by state residents asking for relief.
"It's no secret rising property taxes are a tremendous problem for Hoosiers," Bayh said. "It is affecting middle-class families, seniors and everybody who cares about tax fairness. Making the federal tax fairer and alleviating property-tax burden is the right thing to do."
He said it is unfair that a small percentage of Hoosiers in higher income brackets can reduce their federal income-tax burden by claiming the property taxes they pay as a deduction while an estimated 942,000 Hoosiers currently cannot.
Bayh said his bill would generate hundreds of dollars in federal income-tax breaks for individual homeowners. The amount of the breaks will depend upon homeowners' income and the amount of property taxes they pay.
He said homeowners who don't itemize will pay an average of $1,200 in property taxes, according to the Indiana Legislative Services Agency.
That average homeowner, with an income of between $31,800 and $77,100, would save $300 in federal income taxes.
A homeowner in that same income bracket with a $2,000 property-tax bill would get a federal income tax cut of $500.
Bayh said the bill has bipartisan support, but more legislators need to be sold on the measure to make it law. He said a similar bill in the past was unsuccessful because it would cost the U.S. Treasury at least $7 billion in revenue.
"That is a little less than what we are spending every month in Iraq," Bayh said. "It's the kind of thing we can afford if we make it a priority."
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