Indiana's Property Tax Caps: Effects on Equity, Service Delivery, and Tax Competitiveness

Abstract

As part of the Fiscal Benchmarking for Indiana's Local Governments project, the authors examined concerns for counties, cities and towns, and townships potentially related to Indiana's property tax caps. The tax caps provide tax savings for taxpayers, but a loss of revenue for local governments that provide taxpayers with services. The results of this analysis show the following:

Government revenue losses increase as most indicators of wealth and economic well-being decline, and that this is not explained by larger government tax levies. Property tax savings primarily accrue to commercial and industrial property. Revenue losses may have resulted in reduced service delivery and infrastructure provision. Review of other studies demonstrates that property tax caps have not resulted in competitive tax rates for economic development.