Ind. Senate panel advances bills on property tax caps, delay on unemployment tax increases

Panel sends tax bills to full Ind. state Senate

INDIANAPOLIS — Bills aimed at adding caps on property tax bills to the state constitution and delaying increases on unemployment insurance taxes are now before the full Republican-controlled Senate, days before the entire Legislature convenes on Jan. 5.

The Senate Tax and Fiscal Policy Committee voted 9-3 to endorse the property tax legislation. It was first approved in 2008 and if passed again this session, voters would decide in November whether to place the caps in the constitution. Doing so would make it tougher for the Legislature to change the limits.

The Legislature enacted a law earlier this year to phase in an increase on unemployment insurance taxes that employers pay beginning Jan. 1. The bill endorsed 10-1 Tuesday would delay the increase for one year, saving employers more than $250 million.

Under a law passed in 2008, property tax bills on homeowners this year were capped at 1.5 percent of their homes’ assessed values, with 2.5 percent limits on rental property and 3.5 percent caps on business property. The caps are to be lowered to 1 percent, 2 percent and 3 percent, respectively, in 2010.

The caps are estimated to save property owners about $465 million in 2010 and $488 million the next year — money local governments and schools won’t get as a result.

Many local government and school officials oppose the constitutional caps, saying the current limits already have forced them to make budget cuts, impose user fees or raise local income taxes to help offset the limits. Some on the Senate committee agreed, and noted the estimated effects on the caps are just that — estimates.

“Shouldn’t we know the effects before we cement them in stone?” said Rep. Lonnie Randolph, D-East Chicago. He was one of three Democrats who voted against the legislation.

But one Democrat — Sen. Connie Sipes of New Albany — joined eight Republicans who voted for the measure.

“This is one step towards people being assured of the taxes they pay on property,” said Sen. Jim Buck, R-Kokomo.

A Democratic-controlled House committee plans to vote on the legislation Monday.

Senate Republicans say a one-year delay in unemployment insurance tax increases would help companies retain workers and possibly wait long enough for a federal bailout. They say Indiana’s economy hasn’t recovered as much as lawmakers had hoped and that delaying the tax increases for one year would save jobs.

The state has been paying out hundreds of millions of dollars more in unemployment benefits than it has been taking in through taxes; so far it has borrowed more than $1.3 billion from the federal government to keep the fund solvent. That figure is expected to climb to $1.7 billion by January.

Business groups support the delay, saying a tax increase now will force employers to make layoffs that will lead to more jobless claims. The Senate committee endorsed the bill without any members commenting on it during Tuesday’s meeting.

Democratic House Speaker Patrick Bauer of South Bend has said little about the proposed delay, saying only that House Democrats would examine it.