New analysis shows some counties' homeowners burdened with disproportionate share of property tax

Yahoo

28-02-2025

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As Indiana's legislature continues to debate statewide property tax reform, officials in Lake County are pointing to new data showing that homeowners have taken on an unfair share of property taxes.
The analysis — compiled by Scott Schmal, the county council's financial director — additionally identified at least eight other Indiana counties with a similar tax burden shift.
From 2019 to 2024, the amount of assessed value of commercial property increased by about 12% in Lake County, according to Schmal's report. Taxes for those properties are capped at 3%, per state law. But the amount of assessed value of owner-occupied homes — which have a lower property tax cap of 1% — increased by almost 50%.
Assessed value growth doesn't automatically cause a property tax bill to increase, but it's closely related.
Department of Local Government Finance (DLGF) data reviewed by the Indiana Capital Chronicle backs up what Schmal found in Lake County. The statewide numbers show that homesteads in the 1% cap class contributed 49.6% of all Indiana property taxes collected in 2019, while commercial and industrial properties in the 3% cap accounted for 58.7%.
As of 2024, property taxes paid by residential homeowners across the state boosted to 54.1% of the total collected, and commercial and industrial property taxes collected dropped to a 39.3% share.
Allen County Assessor Stacey O'Day, who also serves as president of the Indiana County Assessors Association, noted that assessments start out at cost and are trended to reflect market value using sales data. Assessors typically have 'ample sales' to trend residential properties because they sell more often, but because commercial and industrial properties do not regularly change hands, assessors often rely on the DLGF cost tables, which have historically been updated every four years. The most recent tables were published in January 2022.
That means residential assessed values trend closer to current market rates — likely causing the property tax burden to shift higher for those in the 1% cap class.
'It's a general consensus that the homeowners have been picking up the bigger burden as the years go by, and a lot of it is coming from businesses getting a bigger exemption each year. So, that's a natural shift, as well,' O'Day said.
She added that if businesses are paying less each year 'that burden's got to give somewhere.'
Schmal maintained the assessment process is fundamentally flawed and is the cause for tax burden shifts. 'History will repeat itself,' he emphasized, unless reform efforts address property value disparities.
'This is a statewide issue. Data in each county shows the same property tax burden shift from the 3% category to the 1%,' Schmal said in a news release. 'Property tax reform likely would be less of a topic if this assessment dynamic did not exist.'
Even if the General Assembly freezes the property tax levy — one of several provisions currently baked into Senate Bill 1, Indiana's front-running property tax relief proposal — homeowners will continue to see their tax bills increase, Schmal continued.
Rather than a freeze, northwest Indiana officials want lawmakers to hone in on how properties are assessed. Schmal specifically suggested that commercial property assessments trend off of the composite index for owner-occupied homes.
Sen. Dan Dernulc, R-Highland, said he shares similar concerns.
'If we have tax relief, I think that's great. But how far is that tax relief going? If the trend is that the 3% keeps going down, we're going to have the same problem several years down the road,' Dernulc told the Capital Chronicle. 'Because the 1% keeps going up — the values of our houses keep going up. But for some reason, it's not trending the same way for the 3%, so that has to be looked at. And that's my biggest concern as (the legislature) looks at property taxes. … The 3% is where we have a problem.'
Indiana law sets caps on the amount of property taxes an owner pays, based on the property's assessed value.
For owner-occupied homesteads, the cap is 1% of the gross assessed value. For other residential property and farmland, the cap is 2%. All other property — including for businesses and commercial use — is capped at 3%.
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Assessment Dynamic Shifting Tax from 3% Class to 1%(Owner Occupied)
Property tax rates are the same for all three categories of property and are determined by taking the total levy divided by total net assessed value.
Any disproportionate inflation or deflation in a category is reflected in the opposite direction in the slower changing categories because 'the pie is always 100%,' Schmal noted.
Schmal's data for Lake County indicates the assessed value in the 1% classification increased 49.9% — or an average annual rate of 8.4% — and a similar situation for the 2% classification. The 3% classification, however, only increased by 11.5%, or annual rate of 2.2%.
'How I interpret this data is the increased rate of growth in the 1% and 2% classification combined with the suppressed AV growth in the 3% classification has shifted property tax dollars from the 3% category to the 1% and 2% categories,' Schmal said.
Data further shows the gross assessed value for the 1% class in Lake County grew from about $21.7 billion in 2019 to $32.5 billion in 2024, a change in assessed value of about $10.9 billion, or 49.9%. The gross assessed value in the 2% class during the same time period also rose by 42.5% from about $4.4 billion to $6.3 billion. In contrast, the assessed value for the 3% classification climbed by only 11.5% from about $13.6 billion in 2019 to about $15.2 billion.
'As evidenced during this same time period maximum levies increased by approximately 4%,' Schmal said. 'This means the only explanation to double-digit property tax increases on homesteads is a shift of tax burden from 3% to 1%.'
The 'most telling figures' show the assessed value mix for the 1% and 2% classifications grew from 2019 to 2024 by a combined 6 percentage points, while the 3% classification reduced by 6 percentage points.
Other Indiana counties recorded similar trends, according to Schmal's analysis.
The property tax burden shifted 7 percentage points in Marion County. In 2019, the 1% category accounted for 45% of the county's property tax pie; the 2% category for 18%; and the 3% category for 37%.
By 2024, the 1% homestead responsibility rose to 50%, and the 2% category to 20%. The tax burden share for those in the 3% category, meanwhile, dropped to 30%.
DLGF data for Marion County indicates that residential property taxes paid in 2019 were equal to $494.8 million, or 49.05% of the total collected; commercial and industrial property taxes collected tallied to $507.5 million, or 50.3%.
In 2024, the burden shifted to $830.2 million paid by homeowners in the 1% cap class, amounting to a nearly 58% share of all property taxes collected in the county. The $598.2 million paid by commercial and properties in the 3% class dropped to 41.7% of the overall pie.
Burden shifts from the 3%-capped properties to those at 1% were additionally noted in Allen, Hamilton and Montgomery counties by 5 percentage points; and in Vigo County by 4 percentage points. The property tax shifted in Tippecanoe County from the 3% category to both the 1% and 2% categories.
Still, David Ober, senior vice president of business operations and finance at the Indiana Chamber of Commerce, held that businesses across the Hoosier State are paying their share. He referenced the group's recent tax study which found that businesses account for 65% of property tax collections in Indiana, compared to the national average of 54%.
'While this varies across the state's more than 2,400 taxing units, the study makes clear that commercial taxpayers contribute more than they demand in local government services,' Ober said. 'Population growth and rising home values should naturally lower property tax rates. However, unchecked local government spending can offset these benefits. That's why the Indiana Chamber supports reasonable controls on local taxing authority.'
Dernulc applauded efforts by Gov. Mike Braun and his Republican supermajority caucus to address property taxes, but he said Senate Bill 1 — now up for negotiations in the House — 'needs to ensure that locals are cared for, and that they're funded.'
Calculating property taxes relies on a complex formula dependent on assessed value, levies, school referenda and locally set tax rates — with state lawmakers largely playing a reactionary role to rein in rampant increases.
The current tax relief proposal would restrict school referendums; allow homeowners to defer some of their property income tax when selling a home; and freeze the maximum levy growth quotient for 2026 before setting caps for the following two years.
After the 2026 freeze, levies could increase up to 1% in 2027 and 2% in 2028.
Senate property tax relief drops main portions of Gov. Braun's plan
The Senate version of the relief plan is estimated to save taxpayers a collective $1.4 billion over the next three years. A final draft of the bill likely won't be finalized until late April.
Schmal said the proposed levy freeze, while cutting local funds, would only provide short-term temporary relief for homeowners. He argued that the assessment system must be changed for any long-term relief to occur.
Dernulc separately maintained that a levy freeze 'could and would hurt' locals' ability to maintain roads and other services.
'There's only the size of a pie that we could take from, but I still want to make sure that we have our services … I want to make sure my locals — when it comes to public works, fire, and especially schools — are not hit hard, because when services are cut, people are not going to be happy with that,' he said. 'So, freezing the levy, oh boy, that would be a tough thing. But we were able to get through it in Lake County.'
The senator recalled his time on the Highland and Lake County councils, during which the county's property tax levy was frozen.
The freeze was enacted in 2007 by the General Assembly to encourage the county to adopt a local income tax and reduce reliance on property taxes. The hold prevented Lake County officials from increasing the property tax levy beyond the 2007 amount. It was lifted in 2023 when local officials adopted a county-wide 1% income tax.
'It was very tough to make sure we balanced the budget, but we were able to do it,' Dernulc said.
He made clear that each county needs a certain threshold of property tax income for local decision-makers to fund local police, schools and otherwise. But how different properties are assessed — and how the share of those taxes are calculated — is ripe for review.
'Yes, property values do trend up and go up,' Dernulc continued, 'but it needs to trend up for all 1%, 2% and 3%. That's something that needs to be addressed.'
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