Indiana’s Democratic nominee for governor unveiled her $600 million plan Thursday for addressing rising property taxes, including fiscal impact and estimated savings for taxpayers.
Jennifer McCormick’s campaign team published a fact sheet Thursday morning, touting the plan as a way to provide “targeted relief to those who need it most without cutting essential police, fire, and school services to Hoosiers.”
“It impacts a lot of Hoosiers, our plan … not everyone, but most Hoosiers, gain a little bit. That was the goal: that Hoosiers would have some relief — and not just this group or this group,” McCormick said in a virtual press conference. “And … not place the burden solely on our towns and local governments.”
Similar proposals released by her Republican and Libertarian opponents — U.S. Sen. Mike Braun and Donald Rainwater, respectively — have been criticized for not providing fiscal estimates or naming alternative funding sources for key local services like public safety.
McCormick relied on bipartisan lawmaker proposals previously vetted by the General Assembly’s Legislative Services Agencies, a nonpartisan entity which calculates a fiscal impact for each bill filed by legislators.
“We did not want to go out on a limb here by ourselves and be irresponsible. We feel like that’s what the Braun and (running mate Micah Beckwith) plan did,” McCormick said. “Also, we want to stay away from targeting and taking away critical services to Hoosiers and really putting a burden on our local government. That’s not our intent and we feel like our plan certainly did not do that.”
McCormick seemed optimistic that relief could be adopted quickly by the General Assembly under her plan because it used bills — and fiscal reports — from both Republican and Democrat lawmakers.
“The big piece of this is it’s ready on day one. We did not want a plan that people had to take time to figure out the fiscal impact, to figure out what would work to get that bipartisan buy-in. It’s already there,” McCormick said. “… They could call the General Assembly into session and, boom, pass it and then (provide) relief for Hoosiers.”
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According to an analysis by the Association of Indiana Counties and Policy Analytics, the gross assessed value of homes jumped 16.5% on average between 2022 and 2023 and property tax bills increased by 18.2% on average.
Plan details
McCormick’s plan includes capping property tax increases at 10%, combined with increasing the homeowner property tax deduction by 40%; increasing personal exemptions by 150%; and increasing the renters tax deduction by 33%. All changes provide relief through income tax filings, as opposed to reforming the underlying system.
That had the benefit of addressing property taxes in light of a Hoosier’s entire tax burden, said running mate Terry Goodin, a former state lawmaker.
“What we’ve done is we’ve actually taken a comprehensive look, because taxes are taxes, right? … What we’ve figured out is, ‘Hey, it’s better to take this comprehensive approach and weld these together and make it into one machine instead of just all these different parts,’” Goodin said.
Justin Ross, an economist and professor with the Indiana University’s School of Public and Environmental Affairs, is a member of the state’s two-year State and Local Tax Review Task Force. He likened McCormick’s proposal to a subsidy for local governments paid for by the state.
“What they’re looking to do is grant property tax relief through the income tax system, rather than restricting what local governments can raise or how they can raise money,” Ross said. “… One advantage of that type of thing is that it holds local governments harmless in granting property tax relief. A second thing is that it’s easier to build in progressivity with means testing.
“So, if you’re trying to restrict what property taxes can be raised from somebody on the basis of their income, that’s hard to do in our existing property tax system. Because the property tax system doesn’t track income,” Ross continued. “Whereas (in) our income tax system, that’s what we’re doing.”
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Indiana already provides some property tax relief through its income tax system, including through some of the areas that McCormick suggests increasing.
“I want to give credit where credit is due,” McCormick repeatedly emphasized, citing the legislation and lawmakers that inspired the proposals.
She also said that committee members serving on the state’s two-year task force — which includes Ross — might have new ideas that could be adopted.
Ross said the task force had heard many of the same concerns motivating gubernatorial candidates to propose relief. The committee, which met last in April and doesn’t yet have another meeting scheduled, has not reached the point of crafting recommendations.
Capping increases at 10% could save homeowners roughly $23 million in the 2024 calendar year or $7 million in the subsequent year, according to the fiscal calculations for a 2023 bill filed by Republican Sen. Brian Buchanan, of Lebanon. Schools, libraries, counties and towns would lose that funding, however.
“Property tax caps are a thing that sounds simple from the taxpayer side, but in the reality of running governments and having transparency … it makes it complicated,” Ross noted.
A 40% increase in the homeowner property tax deduction, from $2,500 to $3,500, would save an estimated $8.8 million, according to LSA.
For seniors, individuals making up to $40,000 and households making up to $50,000 with assessed values up to $300,000 would qualify — an increase from $30,000 and $40,000, respectively, for property up to $200,000 currently in statute. LSA’s estimated cost for this is between $15 million and $22 million; it would impact local units of government.
For disabled veterans — which includes Hoosiers with total disabilities or veterans over the age of 62 with at least a 10% disability — the cap on assessed values moves from $240,000 to $350,000. Local governments would lose the estimated $6.8 million that these taxpayers would save.
The 150% increase in exemptions on personal income, on the other hand, would raise the limit from $1,000 to $2,500. Taxpayers would save an estimated $500 million while the state would lose roughly $333 million and local government units would lose $173 million.
Lastly, increasing the renters deduction from $3,000 annually to $4,000 annually could cost an estimated $28 million in state and local revenues.
Legislative inspiration
At least three of the included ideas — the renter’s deduction, a 150% increase in personal income exemptions and the 40% homeowner deduction — come from a 2023 proposal offered by Indianapolis Sen. Fady Qaddoura, a Democrat. Lawmakers took no action on that proposal, however.
Lawmakers also didn’t act on two other proposals cited in McCormick’s plan, including the disabled veterans cap on assessed values and the 10% cap on property tax increases, which came from Fort Wayne Reps. Chris Judy and Buchanan, respectively.
The sole proposal to advance centered on changes for senior Hoosiers. It passed the Senate unanimously in 2022 only to die in the House without a hearing. A January 2022 hearing on the bill, authored by Markle Sen. Travis Holdman, didn’t have any opposing testimony.
Judy, Buchanan and Holdman are all Republicans.
McCormick’s plan would still cut revenues to local taxing units, including public schools and libraries. She said that the state would pick up “the majority of this tab,” saying it had a surplus, while municipalities would see between $173-175 million in revenue loss.
“When you look at the impact for 92 counties, it is not nearly what that impact was for the Beckwith-Braun ticket, which was unbelievable,” McCormick said. “But it would be a minor impact and so we did look at that. Our goal was to minimize that as much as possible.”
Comparison to opponents
U.S. Sen. Mike Braun, McCormick’s Republican opponent, released his property tax proposal without any fiscal analysis and adjusted some aspects after promising a reset to 2021 levels — something not included in the original plan.
Braun’s plan points to the state’s homeowner deduction, which is designed to reduce the taxable value of a home but “has not kept pace with rising home values,” according to the campaign.
Homeowners with an assessed value of over $125,000 would be allowed to deduct 60% of their home’s assessed value from their tax bill, while those below that threshold would take the standard deduction of $48,000 in addition to a 60% supplemental deduction.
Additionally, future tax increases would be capped annually to 2% for senior, low-income Hoosiers and families with children under the age of 18. All other homeowners would be capped annually at 3%.
The Braun campaign said the average Hoosier homeowner would have saved $1,000 over the last five years with this tax cap. Braun’s plan also included revisions to referendum ballot language, among other provisions.
Meanwhile, the property taxes plan from Libertarian Donald Rainwater would cap taxes based on purchase price. Rainwater added that the state would send more dollars to local governments to offset losses.
McCormick criticized Braun for his plan that only impacted local coffers, as opposed to the state budget — pointing to his 2015 vote in the General Assembly for a failed bill that would have made several tax code changes.
McCormick contrasted her proposal with Braun’s plan, which she said left “a lot to be desired,” and would have a “brutal” impact on local budgets.
“… when you isolate the General Assembly from a plan — it’s never a good idea when you’re sitting in the executive office of a governor,” McCormick said.
This article was written by Indiana Capital Chronicle reporter Whitney Downard.
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