State's Tax Caps Create Winners And Losers, New Reports Show

INDIANAPOLIS – According to the Indiana Fiscal Policy Institute, the state’s property tax cap has allowed Hoosiers to keep more money in their pocket, but has forced local governments to find new revenue streams or make difficult cuts.

A report released Tuesday estimates that local governments have lost more than $760 million in revenue since the caps were implemented in 2009.

One study looked at 18 of the largest cities in Indiana, with the exception of Indianapolis. Researchers omitted the state’s largest city due to its unique city-county government structure.

Institute Director John Ketzenberger said some communities took a bigger fiscal hit than others.

“The communities around Indianapolis have lost significant revenue to the property tax caps,” Ketzenberger said. “But they are growing so quickly that it doesn’t affect them as much as a community like Terre Haute which has lost a lot of its property tax base.”

With local property tax bases a fraction of what they were, local governments have turned to other sources for income. User fees on services like waste removal as well as local optional income taxes have been implemented to make up the difference in some communities.

“The legislature has in effect said to local governments you can’t raise as much in property tax as you once did,” Ketzenberger said. “It has really forced local governments to take on a larger policy-making role when it comes to how they will pay for local services.”