Indiana lawmakers float alternative property tax solution

By GARRETT BERGQUIST
WISH-TV | wishtv.com

The House’s top budget writer on Wednesday said Indiana’s local tax system is ultimately behind many of the problems that have brought property taxes to the fore.

For the second week in a row, the House Ways and Means Committee took testimony on Senate Bill 1, the property tax relief bill that has become the signature issue of the 2025 legislative session. Committee Chair Rep. Jeff Thompson, R-Lizton, on Wednesday floated a new proposal that would replace the bill’s current language with a property tax proposal he filed earlier this session.

Thompson’s amendment would phase out the state’s current property tax deductions and replace them with a single homestead deduction amounting to two-thirds of a home’s assessed valuation, or one-third of assessed value for homes eligible for the state’s property tax circuit breaker. The circuit breaker is for low-income homeowners age 65 and older, and limits any increase in their property taxes to 2 percent per year. The measure also contains several tax provisions unrelated to property taxes.

Thompson said the state’s constitution mandates setting property tax rates but, in practice, many of the state’s property taxes are levies, meaning the total amount of funds a local government unit may collect on a rate. He said his goal is ultimately to set a single, equal rate across the state of $3 per $100 assessed value.

“If you raise the rate (under the current system), I get more dollars for my unit and the other units lose,” he said. “And if I lower the rate, the other units gain and my unit loses, and my taxpayers didn’t see a penny change. And to me, that’s the most important part of the bill.”

That goal drew pointed questions from Democrats on the committee. Rep. Ed DeLaney, D-Indianapolis, asked who would be responsible for ensuring individual taxing districts did not exceed the maximum rate. Thompson said that’s the General Assembly’s job.

The question of how to balance property tax relief with the needs of local services such as police, fire, and schools has driven this year’s debate over SB 1. Thompson’s proposal still would cost local governments more than $736 million per year by 2031 but, unlike earlier versions of SB 1, some local taxing units would gain revenue. For example, Indianapolis Public Schools would lose about $9.4 million in 2031 but the tax district that funds Indianapolis Metropolitan Police Department would bring in an additional $8.1 million. That’s in part because the bill also would allow municipalities to set local income tax rates of up to 1.2 percent.

Thompson’s committee took several hours of testimony on his amendment but intentionally did not take any action on it. The language of his amendment has not been added into the bill. Thompson said the bill is still very much an ongoing conversation and his amendment does not necessarily represent his committee’s final plan. He said he expects to hear additional proposals in the coming weeks.

This story was originally published by WISH-TV at wishtv.com/news/politics/indiana-property-tax-reform.