Rep. Greg Porter, D-Indianapolis, speaks with reporters after a committee votes to adopt a new property tax proposal. Photo by Whitney Downard, Indiana Capital Chronicle.
By Whitney Downard
Indiana Capital Chronicle
INDIANAPOLIS — A new property tax plan from Indiana House Republicans including big business breaks and increased discretion over local income taxes, prevailed over qualms from Democrats on Monday, April 7.
It advanced to the House floor for further considerations after the 15-8 committee vote.
Under a massive amendment accepted by the committee, municipalities could for the first time raise local income taxes at 1.2% — though total local income taxes for the county must fall under a 2.9% cap.
The legislation would also phase out, by 2030, the business personal property tax on anything purchased this year or later.
Democrats balked at voting for the 368-page amendment without any fiscal foresight. The Legislative Services Agency doesn’t draft fiscal notes on amendments until they’re adopted.
Rep. Greg Porter, D-Indianapolis, said, “We still have a lot of movement on it to get it to the point that we can even entertain it, as Democrats.”
Amendment author Rep. Jeff Thompson, R-Lizton, said it balances local government funding needs with relief for homeowners.
Veterans will qualify for a $250 credit toward their bills on top of that estimated $200 average credit. Fixed-income seniors will see another $100 credit. Currently, both groups may qualify for deductions to their property taxes.
In total, Republicans said homeowners would save $1.1 billion over three years through a “decrease on the increase” in revenue that local units of government are expected to see in coming years. Thompson said that, without action, locals would see an estimated 5.3% revenue growth.
Under the new property tax plan, that growth will fall to 3%, he continued, higher than the state’s projected revenue growth.
But Democratic committee members criticized the plan for falling short, saying it further benefitted businesses at the expense of homeowners and that relief should be targeted for the most vulnerable Hoosiers.
As of 5:40 p.m. on Monday, no new fiscal analysis had been posted to the General Assembly website.
The Business Personal Property Tax
The business community notched a long-fought win under the new property tax proposal, phasing out a charge placed on business personal property, which can include equipment, billboards and more. Small businesses with less than $80,000 in such property are already exempt.
A 2024 study from the Indiana Chamber found that exempting the tax on new business personal property would reduce revenue by $1.2 billion for the state while eliminating the depreciation floor would shave away another $35 million.
But some analysis has found that homeowners have seen a disproportionate increase in their share of the overall property tax burden when compared to businesses, an argument that appeared to resonate with Democrats.
Property tax caps apply differently depending on the land’s use, whether it’s farming, housing or corporate. Homes fall under the 1% cap while businesses generally fall under the 3% cap.
Taxes for properties that fall into the non-homestead categories, which don’t have the same market value assessment triggers, have grown at a flatter rate, Rep. Chris Campbell, D-West Lafayette said.
Local Income Taxes And Schools
Notably, the state is in the midst of a multi-year effort to lower its income tax rate, from 3.05% in 2024 to 2.9% in 2027. A bill headed for Braun’s desk would allow that rate to fall further after 2030, dropping 0.05% if revenue collections exceed 2.5% growth in the four preceding years.
Rep. Jeff Thompson, R-Lizton, responds to a question on Feb. 6. Photo by Whitney Downard, Indiana Capital Chronicle.
But that overall rate doesn’t account for the variance between counties.
The Tax Foundation reports that even as the statewide rate falls, local income taxes have climbed. Between 2014 and 2025, the state rate fell from 3.4% to 3% — but the local rate grew from 1.4% to 1.72%.
Under the newly amended bill, the total maximum rate would drop from 3.75% to 2.9% for most counties. An earlier version of this story said it would increase, but that was only one portion of the three components making up the local income tax: property tax relief, expenditure and special purpose.The expenditure category will rise to 2.9% but the other two categories will eventually expire.
The municipal tax of 1.2% is within that rate, staffers said.
The possibility of increased local income taxes negated potential property tax savings to Democrat Rep. Tonya Pfaff, of Terre Haute.
But one taxing entity won’t be able to impose a local income tax — even though school corporations will likely lose out on funding.
One of the explicit targets for the GOP authors was the use of debt in communities, specifically at school corporations. A Friday release said that local governments held $54.3 billion but didn’t break that number down further.
Funding referendums, for both schools and locals, will be moved to the general election, which has a higher turnout rate than a primary or special election. Schools previously objected to such a requirement, noting that the school year doesn’t align with the election calendar.
The bill, according to Thompson, will also incorporate elements of Senate Bill 518, which prompted a handful of protesters on Monday. The original version would require traditional schools to split their revenue with charter schools.
The updated language also dissolves the Union School Corporation, which has thousands of virtual students alongside a small physical campus. However, Thompson said that dissolution doesn’t occur until 2027, giving parents time to find other options.