Here Comes The Other Shoe.......
It's been several years since the Indiana State Supreme Court ruled on behalf of a small number of Lake County Indiana tax payers that the previous system of assessed valuation was unfair. As thousands of Hoosiers pay their tax bills over the coming weeks, we will all be asking how the system can STILL be this off base.
First, virtually none of the hundreds of homes that have sold in the last year that I have reviewed are being taxed at their recent sale value under the new bills (which is the actual point of having the state assess by MARKET VALUE). While not all counties have a defined example, it appears the new distribution of tax burden is going to become a major pressure on those who pay property taxes in Indiana. We have heard examples through our partners in the lending and title business that a number of real estate transactions have fallen apart at the closing table as the new tax burdens became clear to prospective buyers. Many municipalities in Hendricks County have had 50% increases in taxes from the last tax year. For many home owners, that is a painful increase. For some, it is a catastrophic one.
Here are a couple of examples from Hamilton County that have come to light. A $325,000 home previously taxed at $2410 for the entire year will be paying just over $3000 per year due on July 1 of 2007. Remember the headlines about a 'rebate check' we were supposed to receive to blunt the extreme shift in residential taxes? From the tax bills we have seen there is no mention of a rebate, only that the credit passed by the legislature has been assigned half to the Spring and half to the Fall of each tax bill. Think there may be some confusion on this issue?
The result of all of this could be a new round of foreclosures in the state of Indiana. People who were close to the edge before are going to get unceremoniously shoved over the cliff if their taxes increase 40-50%. The last thing Indiana's economy needs right now is a hammer to the value of it's home owners. This scenario, if it plays out as it seems, will be a nightmare for Indiana tax payers and real estate owners. It will blunt the first time home buyer market with higher payments, it will suppress most potential equity growth and essentially send the overall real estate market into dormancy. It would ensure that the current slow market we are in would last well beyond 2008.
I hope we're all wrong about these bills....that there's something more to them that will change their net affect both this year in years ahead. The message to our legislators should be loud and clear: Fix this mess NOW! If not that boot may be coming down hard on all of us who have believed in the American dream in the Hoosier State.