Indiana Political Review

There are two stories in the Star that I think merit some comment, here and here. The basic gist of both is that Governor Daniels has come to the obvious conclusion that the commercial property in Marion, Delware, Posey and Gibson counties were not assessed for the latest round of property tax assessments.

In Marion County (and apparently the other three counties), commerical/ industrial property was not reassessed. As a result, it is likely currently assessed quite a bit lower than its true value. What the Governor will accomplish here is to ensure that no matter what type of property one holds in these counties, it will be taxed equitably. Keep in mind that the same amount of money is going to be collected no matter what the outcome of the commercial property reassessment. If, in aggregate, the commercial property assesses at a higher value, then holders of commercial property will pay more of the fixed tax bill and homeowners will pay less. That is the most likely outcome. In the end, the tax burden will be shared more equitably than is the case now. There is no reason that a home should be paying roughly the same amount of tax as a Kroger Supermarket next door (as has happened in one neighborhood in Indianapolis). But, in these counties, because commercial property has not been accurately assessed, examples like these have happened. Think about it. You cannot purchase a Kroger Supermarket for the same (or less) as the house which is located next door. Likewise, no one should expect that the taxes on the two properties should be even close to the same.

Some people are upset that the response by Governor Daniels (so far) only addresses the problems in the four counties listed. Please remember, that his response will not change the tax bill so that other counties (outside of these four will pay more in taxes), it will only reallocate it among the property owners in the four counties that a reassessment has been ordered for. This will have NO EFFECT on other counties.

You are probably still being screwed in your county, but the problem is not with Marion County or the other three and what reshuffling of the tax burden in Marion County occurs is entirely beside the point with respect to your tax bill, if you live in another county. Your beef is with your local government and their spending habits.(You may also have the same problem as Marion County in that assessments on all property were not completed – you should probably find out).

But, how will a reassessment of commercial properties help those in the counties affected? Let’s use a grossly oversimplified example to show why (Since this next involves math, I know Birdy is cringing, but stick with me, it’s really simple math). Suppose there is a hypothetical county with one residential property and one commercial property. Each are assessed at $100. The government determines (through its budgeting procedures that it requires $6 to provide the services it has committed itself to. What then happens is it looks at the total amount of property in the county, in this case $200 worth and determines the tax rate. In our example case, the rate would be 3% (3% of $200 =$6). Therefore, in this example, the homeowner pays $3 and the commercial property owner pays $3.

Now let us suppose that the commercial property is really underassessed. Its true value is $200. Meanwhile the residential property is properly assessed at $100. Now, the government looks and finds that there is $300 worth of assessed property in its county. They still need $6 (that bit doesn’t change), but to get there, they need only impose a tax rate of 2% (2% of $300 =$6). Therefore, the homeowner pays $2 (2% OF $100) and the commercial property owner pays $4 (2% OF $200). The division is more equitable because each property owner is now paying for a share of the taxes relative to the value of the property he owns.

Of course, none of this addresses whether it was legitimate in the first place for the government to demand $6. Six dollars in this case, may be exorbitant (especially if start putting words like “million” after $6). But, the example shows how reassessing property can result in lower taxes for homeowners.

In the end, the problem is government spending. It is out of control. This response from Gov. Daniels will only reallocate the burden of the tax bill. We are still being taxed too much and this does not address that problem. That problem will have to be addressed in the next election. Stay angry until November; resolve the issue then. In the meantime, allow the Governor to address the short-term problem of the allocation of the tax burden in these counties. The work that the governor is doing is helpful, if not conclusory with respect to the overall problem.

 Kudos to Governor Daniels for stepping up and beginning to deal with this problem…now, if only he can get the legislature and city council to rein in spending…