By DAVE BLOWER JR.
Farm World Editor

INDIANAPOLIS, Ind. — Gov. Mitch Daniels, flanked by House Speaker Rep. B. Patrick Bauer (D-South Bend), Senate President Pro Tempore David Long (R-Fort Wayne) and Lt. Gov. Becky Skillman signed a new property tax policy into law last week under that Statehouse’s ornate rotunda.
The policy is estimated to cut Hoosier homeowners’ property tax bill by more than 30 percent. However, the Indiana Farm Bureau (IFB) and other similar organizations are less than thrilled with the final product from the General Assembly.
The plan, which strongly resembles Daniels’ original policy, will remove an estimated $1 billion from the state’s property tax income this year. The new policy also gives local spending control on major spending projects to voters, and it includes the structure for a constitutional amendment that would cap property tax increases.
The caps, which are opposed by the IFB, would limit homeowners’ property taxes from increasing by more than 1 percent of their assessed valuation each year; a 2 percent cap on farmland and rental property, and a 3 percent cap on businesses and all other classes of property.
The lost revenue from this income is expected to be offset by spending costs and a 1 percent increase in the state’s sales tax from 6 to 7 percent, according to Daniels. Government officials estimate that taxpayers will realize $1.72 in tax savings for every $1 extra paid in sales tax.
IFB’s main complaint is with the graduated caps for different types of property. Farm Bureau’s position throughout this legislative session was that it is inappropriate and discriminatory to apply different caps to different classes of property.
IFP President Don Villwock believes the multi-tiered system will cause a major shift of property taxes away from homeowners and toward farmland and business. He said homeowners are the major users of the services paid for by property taxes. The graduated cap system is part of the constitutional amendment that Daniels wanted to secure permanent property tax relief.
“Even simple bills need legislative rewrites annually,” said Villwock. “Now we are considering amending our constitution that has endured the tests of time with a legislative proposal that was only debated during one short session.”
Following the bill-signing ceremony, Skillman and Indiana Ag Director Andy Miller hosted a press conference for farm media to explain how they believe that the policy will benefit Hoosier farmers.
“This plan is a good deal for agriculture,” Miller explained. “Property tax bills for Indiana farmers are going to go down. All of these (property) classes are going to see reductions in tax bills.”
Miller said more than 90 percent of Indiana farms will see a decrease in property taxes. He explained that the other 10 percent have to do with a few areas, such as St. Joseph County, where local spending needs cannot allow a cut in revenue at this time.
Miller added that the property assessment process will not change. Indiana farms will continue to be assessed on their “market value in use” and not real market value. This means the property is tied to a farm’s net operating income. “We only increase the assessments if farmers are making more on their farm,” he said.
Miller explained that all farm sizes will see a net decrease in property taxes, ranging in an estimated 9.9 percent for farms in the 250-acre size to 7.4 percent for operations that are larger than 2,000 acres.
In addition, he believes that the shift to a higher sales tax will benefit producers.
“Nearly everything we buy is sales tax exempt,” Miller stated.
Skillman cautioned critics to be patient. She said a constitutional amendment doesn’t happen quickly. The new policy will need to go before voters in 2010 before it can become a permanent reform.
“We’re moving into an era of property tax restraint,” she added.