INDIANAPOLIS | The property tax abolition movement led by Christian conservative activist Eric Miller got some face time last week at the Statehouse.
But the lengthy legislative hearing was more about exorcising a demon than it was slaying the $6.2 billion dragon that is Indiana's real estate tax. Lawmakers want the public to understand the latter is no simple task.
Miller was met with skepticism -- and perhaps a little scorn -- when he told the Commission on State Tax and Financing Policy the death knell for property taxes could be sounded with measured income and sale tax hikes and an iron-clad inflationary cap on state and local spending.
"The Miller plan just doesn't work on the face of itself," said Sen. Luke Kenley, the Noblesville Republican who leads the tax commission. "If we're going to consider eliminating property taxes, we're going to have to do a lot more than he did in order to get that accomplished."
In fact, state analysts say lawmakers would have to more than double the 6 percent sales tax, nearly triple the 3.4 percent income tax or meld a heavy mixture of tax hikes to come up with the billions needed to run local government in Indiana.
Miller, founder of Advance America, a conservative advocacy group that wields considerable Capitol clout, insists on a constitutional amendment to repeal property taxes. Lawmakers are more likely to consider several options aimed at easing soaring property taxes, though the House wistfully endorsed an elimination effort 98-0 last year based on a movement spearheaded by a region legislator.
"I'm the one who put the proposal in to abolish property taxes, and everybody voted for it," said Rep. Chet Dobis, D-Merrillville. "But they looked at it when it got to the Senate and said, 'What's the matter with this guy? He must be nuts.'"
Dobis feels a sense of vindication, he said, now that legislators are sweating property tax bills expected to soar an average of 24 percent across the state. He said he is confident more lawmakers now understand the "Band-Aid" approach to property tax fixes must be abandoned because "this patient needs surgery, maybe an amputation."
Kenley's commission, and another appointed by Gov. Mitch Daniels, are eyeing solutions, and some of the suggestions undoubtedly will be retreads of concepts kicked around for years.
Rep. Dan Stevenson, D-Highland, said he plans to introduce legislation next year to have the state assume welfare costs currently shouldered by local property owners. He wants the $23 million in tax money Lake County pays the state to support hospital care for the poor -- more than four times greater than any other county -- included in the discussion.
But that's a tough sell outside the region.
Kenley said he believes there's a "strong chance" the state will take on at least some the welfare costs, but lawmakers have talked about such a shift for at least a decade.
Township government, another well-worn target, also could get a hard look next year. Stevenson said he considering an effort to eliminate that level of bureaucracy and fold its duties -- primarily fire protection, poor relief and tax assessment -- into cities or counties.
Eliminating property taxes
The Indiana General Assembly's nonpartisan forecasting arm says lawmakers would need to embrace extensive income or sales tax hikes to replace the $6.2 billion raised by property taxes. It could be done by hiking the 6 percent sales tax to 13.2 percent, raising the 3.4 percent individual income tax to 9 percent, or by imposing a 9.5 percent sales tax and a 6 percent income tax.
Advance America, a conservative advocacy group, contends the property tax could be repealed if lawmakers raise the sales tax to 8 percent, increase the income tax to 4.4 percent, add a new business tax to generate $500 million a year and impose an inflationary cap of 3 percent or less on state and local spending increases. Lawmakers argue the Advance America plan would fall far short.