Economist's Take on Property Tax Relief After Governor Braun Signs Bill

INDIANAPOLIS — Governor Mike Braun has signed Senate Bill One into law, aiming to provide property tax relief. The bill, a priority for the governor and Senate republicans, is expected to save Hoosiers $1.3 billion in long-term tax reform.

The legislation introduces new deductions for certain homeowners, reducing their taxable home values. Additionally, it places limits on the total amount of property tax local governments can impose.

“Trying to give more deductions to change the gap between your net of your taxable value rather than just the overall market value," Justin Ross, a professor of public finance and economics at Indiana University, explained.

Critics have expressed concerns about home assessments, which determine property values. Many are puzzled by increasing assessed values. Ross identified factors contributing to this trend, including the pandemic and inflation.

“As the dollar became weaker, it increased the price of goods and the purchasing power of money, so we saw that get translated into higher housing prices as well,” Ross said.

The new law aims to reduce property owner's tax bills by 2030, with 33 percent of a property's value being taxable. The measure also alters how local governments can tax residents, creating a flat rate for long-term property tax relief.

"You are paying property taxes to schools; you are paying them to counties, cities, and so on. If you add up those tax bills, the property tax cap says you can't be above one percent of those tax bills of the market value," Ross added.

While the law aims to save property owners up to $300 on their bills, it also grants municipalities new local income tax powers. This could result in higher income tax bills if enacted.

“It would certainly be possible that you get a relatively small taxable value change on the property tax side and then you'd get a new higher income tax if your municipality decides to do that; that would be higher than that,” Ross noted.