Skip to main content

Should assessed property value or property tax be capped?

Insert photo caption or credit here

Recently there has been some controversy over the property tax issue in Lake County.  In order to combat the issue, the Indiana Legislature passed the Circuit Breaker law which guaranteed that residential property owners would not pay more than 2% of the assessed value in property taxes.  As a result of the increase in the amount of taxes due, many people have been forced to either attempt to sell their homes or have left their homes outright.  Several homes in Hammond, Gary, and Whiting have been left abandoned. 

The problem, however, is not in the percentage of property taxes paid, but in the amount of taxes paid.  Between 2000 and 2002 the assessed value of all real property in Lake County increased 172%, from 3.768 billion dollars to 10.258 billion dollars.  One of the problems with that assessment is that the population in Lake County stayed steady between 2000 and 2003 at an average of 484,252, give or take about 500 people.  This means that the value of the average home more than doubled in that time.  Again, the problem was not in the tax, but in the amount of taxes due.  If, for example, the value of the average home was at $100,000 and the tax was at 2%, then the amount of tax due was $2,000.  If, then, the average home value increased by 172% as was indicated earlier; the value of the average home was then fixed at $272,000.  The amount of taxes due was then $5,440.  Between 2002 and 2003, the assessed value of all real property increased another 129% to 23.465 billion dollars.  That same home valued at $100,000 was now valued at $622,880.  The taxes now due on the $100,000 home were $12,457, more than 12% of the actual value of the home, instead of a mere 2% of the assessed value.  In contrast, between 1999 and 2001 assessed real property value increased from 2.828 billion to 3.768 billion dollars.  The problem occurred when Lake County and Indiana contracted an outside agency and assessed property based on standards that were not consistent with the region being evaluated.  The number of homes being foreclosed increased dramatically and income to local governments fell.  People were abandoning their properties because they could not sell them.  Local residents could not afford the increased taxes now due on their properties and had no choice but to leave and allow the financial institutions to take control.     

The following is an excerpt from the Indiana Department of Local Government Finance Circuit Breaker Fact Sheet, published in April of 2008:

The Circuit Breaker cap was passed into law in 2006 and became effective statewide for owner occupied residential property (homesteads) for property taxes payable in 2008. The current Circuit Breaker caps homestead property tax at 2% of gross assessed value. The goal of the Circuit Breaker is to provide predictability in tax bills by ensuring that Hoosiers don’t pay more than a fixed percent of their property value in taxes.