I have a friend that runs an auto body repair shop. He can do some pretty amazing things with a dented fender, but sometimes the damage is so bad there is nothing to do but replace it. Sometimes there are so many problems with a car that it simply can’t be fixed.
There are a lot of things in this world that can’t be fixed. One of those things is property taxes. We’ve seen a good example unfold in New Castle over the last few years. The owners of the Kentucky Fried Chicken Restaurant on Memorial Drive saw their property taxes increase from $5751.26 in 2005 to $31,453.61 in 2009, based on the increased assessed value of their property.
Last week, the New Castle Courier-Times reported that after a two year battle, the Indiana Board of Tax Review has ruled that the property’s assessed value should be reduced by almost half. While that is certainly good news for the property owners, it points out just one of the many flaws in the property tax system.
Regardless of rules and guidelines that are set in place, deciding property values remains arbitrary. In this case, using the same rules on the same property, two different agencies arrived at values more than $400,000.00 apart. A person has to wonder what would have happened had the property owners not come up with the resources to pursue the fight for two years . What might have been the outcome if a different set of people with different opinions on property values had been sitting on the review board? What would a person with similar properties but lesser resources do to achieve similar results?
In one of their latest attempts to fix property taxes, the legislature has proposed making our questionably constitutional property taxes constitutional by way of a constitutional amendment capping those taxes at 1% of the assessed value for homes, 2% of the assessed values for farms, and 3% of the assessed value for businesses. Of course, there is no provision to keep assessed values from rising, or how we are to arrive at assessed values. Certainly if replacement cost is included in the equation, the newly added caps will be no deterrent to another explosion of property tax bills.
I can understand our representatives addiction to property taxes, and their attempts to convince the voters that they can somehow make them fair through tweaking the Indiana Constitution, or by somehow making them fair without tweaking the Constitution. Property taxes have provided them with a steady and predictable source of revenue for longer than any of them have been in office.
And they might make them less arbitrary if all homes were taxed equally on a per square foot basis, with a similar system for farms and businesses, but you can’t fix a tax that allows the government to seize a person’s home. There are other taxes and user fees that will spread the cost of government more fairly, and allow us to fund the necessary functions of government without relying on the confiscatory property tax.
There is no use trying to fix property taxes. It’s time to replace them.