by Christy Heitger-Ewing

In 2008, Indiana ensconced property tax caps in the state constitution that limit an owner’s property tax burden to a fixed percentage of the property’s gross assessed value, which is 1% of property values for homesteads (owner-occupied), 2% for other residential property and farmland, and 3% for all other property. The caps ensure that a property owner does not pay more than a fixed percent of the property’s gross assessed value in taxes, but the caps do not change the local tax rate. Local government budgets still determine property tax rates in their area.

“Elected officials want that 3% commercial/ industrial growth, but 3% growth cannot occur without 1% growth, because the jobs go where the people and housing are,” says Jonathan Isaacs, Director of Land Acquisition with M/I Homes of Indiana.

While property tax caps have resulted in many communities providing services more cost-effectively, reduction in local government revenue has made it more challenging for some communities to provide services such as public safety, education, and road maintenance.

Elected officials push for the highest value home as possible, thinking that the million-dollar home will bring in more tax dollars when, in reality, they could be leaving a half a million dollars’ worth of assessed value tax off because they hit the circuit breaker for the community.

“It’s driving up people’s desire to have a higher value home, but they may not be getting the benefit of that higher value home,” says Isaacs. “Therefore, it’s jeopardizing our ability to deliver workforce housing that meets demand and can make the community more attractive for all residents and businesses looking to locate in a specific area.”

The bottom line is that we need to have the workforce housing because that’s what brings the jobs and the retail and commercial growth that pays property taxes at that 3% rate.

“We need all three parts of the triangle,” says Isaacs.

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