“Homeowners will get the biggest break, but all classes of taxpayers, including those in agriculture, will benefit from the proposal,” she said during an Oct. 25 conference call detailing the plan. “Farmers who are homeowners pay an average of 40 percent of their property taxes on farmhouses.”

The governor’s property tax plan, unveiled last week, calls for: •Caps on homeowner property taxes at 1 percent of assessed value •Caps on residential rental property taxes at 2 percent of assessed value

•Caps on business property taxes at 3 percent of assessed value

•Expansion of the homestead deduction by an additional 35 percent of a property’s assessed value, after the standard deduction is taken.

The scope of the tax relief will vary across the state, but Daniels estimates that the average homeowner’s property taxes will be cut by one-third, overall. The governor wants to change the Indiana Constitution to make the caps permanent, but that can’t happen until 2010 at the earliest, since the proposal would have to be passed by two separately elected General Assemblies and ratified by voters in a general election.

To finance the cuts, the state will assume certain costs that are currently paid by local taxpayers, including the general fund, transportation costs for K-12 education and care for abused children. In turn, the subsidies that the state currently pays to local governments to offset the effects of property taxes would be eliminated.

The governor also wants to hike the sales tax from 6-7 percent. Although Skillman acknowledged that raising the sales tax could potentially affect Indiana’s ability to compete with neighboring states, she said it beats the alternative.

“The overall tax burden will be much lower with this proposal than if we would’ve moved toward an income tax hike, which was touted by some,” she said. Wagering taxes on new slot machines at horse tracks will offset some of the cost of reduced property taxes.

The proposal also restricts local spending and removes responsibility for property tax assessment from the political process, replacing elected assessors with a single professional assessor in each county.

When he announced the plan, Daniels said he did consider completely eliminating property taxes, but decided against it. “Much as I would like to have taken that route, the risks to our schools, to small business and to our economy generally, dissuaded me. In particular, I couldn’t support the large increase in personal income taxes, paid by every Hoosier worker and most small businesses, which would be necessary for total elimination,” he said.

If the General Assembly passes the proposal, the full extent of the property tax cuts, totaling $1 billion, would go into effect in 2009, giving local governments time to adjust to the changes.

But $950 million in new property tax relief could be in homeowners’ hands as early as next year.

Skillman said several lawmakers are interested in sponsoring the governor’s proposal as it moves forward in the legislature, although it will likely get tweaked as the Senate and House of Representatives weigh in on the specifics.

“We have no illusions that this will just fly through the General Assembly,” Skillman said. “No doubt, we’ll have a healthy debate as this moves forward.”