2026 - The Plan to Replace Property Tax with Something Worse
A few weeks ago, with about 100 people in attendance, I attended a presentation by JD Prescott, my opponent in November, on his plan to replace Indiana’s property taxes with a sales tax on the labor we pay for services. This is a horrible plan. It will cost Hoosiers a great deal more than in how it was presented. Understanding it and how it will hurt is complex. People stop listening at “no more property tax,” and they don’t pay attention to what they are doing to “cure” the property tax issue is worse than the problems with property taxes.
As presented, we take in $10 billion a year collectively in property taxes annually. If this plan would take effect, we would take in $13-15 billion in the first year and then balloon again to $15-17 billion in the second year. So, after the second year, we would be bringing up to 70% more in tax than today with property tax. No matter how you look at it, this is a HUGE TAX INCREASE.
Prescott says that “most people” will be paying less, but his math doesn’t add up. He says that people not paying their “fair share” of property tax now will be paying into the system. Those he is talking about are exclusively the most financially vulnerable in our state: the elderly, the disabled, and veterans.
Don’t forget that in 2019 Prescott was the ONLY REPRESENTATIVE who VOTED AGAINST DISABLED VETERANS giving them a property tax deduction (SB 280 from 2019 https://legiscan.com/IN/rollcall/SB0280/id/839854?__cf_chl_f_tk=O5H6P0Rq8wi8MUsqCYIk3IL4ZR9Zz_ubN8cJ9RgfQL4-1783349068-1.0.1.1-vYkBsIkIecwxDHz9qTyUBCO86NAqurGtjWBF5ndjmnk )
So Prescott has a history of not seeming to care about people who struggle with meeting basic living costs, including those who served our country in the military and have health issues preventing them from working.
In showing that most people will pay less, he says that you would have to spend $14,300 on services to pay $1000 in taxes. Again, this doesn’t add up. These disabled folks and veterans are going to be paying THAT much into the system to make up for everyone else paying less AND bringing in 30-50% and then 50-70% more in revenue?
One thing that was brought up was that renters would pay tax. Prescott acknowledged that renters do pay property tax, just not at the courthouse. It is paid to their landlords who pay it. And then we must take into consideration that renters actually pay more than their fair share of property tax because rental property is taxed up to double the amount of homestead tax because of the constitutional cap being higher. Prescott seems to be under the delusion that when property tax for landlords is eliminated, they will pass that savings on to their renters in the form of lower rent by means of competition with other landlords. He ignores the fact that many areas, there are only a few landlords who own large percentages of the property (take the Ball State area for instance where one landlord holds a virtual monopoly of student rentals). In reality this will not happen without it being put into law. Young people will still be paying high rents and now have to pay more in services because of things such as buying cars which are in need on constant service.
One comment was made that when this particular man was in his 20s, the only car he could afford was in terrible shape and needed constant service. I’m sure this and other issues are common with younger people. Someone in the crowd made the comment that if these young people would stop buying lattes, they’d have the money to afford services. I find this comment to be extremely privileged as most 20 somethings I know (my kids’ friends) are working HARD at multiple low-paying, part-time jobs with no benefits and no days off just to make rent and food. They have no extra income to spend extra for another tax especially when their rents will likely not come down due to what I already said in the monopolization of rental property in an area. It isn’t as if these 20 somethings are getting handed the keys to a brand-new Camaro by their parents. The comment is insulting to their reality.
The one thing that I can foresee is might not be worked into where the extra money for the increased tax revenue would be the tax that big projects such as construction projects would pay for the labor used. That will go up by a great deal for, as an example, a 14 million dollar project would have a 1 million dollar tax. BUT, the building owner would pass that cost onto their tenants in rent. The tenants would increase that higher rental cost to their customers is prices. So, we all get to pay that cost in the end in inflation, and then another 7% on top of that if that cost is labor.
How these funds are distributed is an interesting and nebulous process. The state, of course, is the entity that collects the funds. The revenue would be allocated like this:
· 10% is put into a reserve fund to cover revenue when the economy is bad and we can’t collect as much sales tax
· 45% goes to schools
· 20% goes to counties based on 75% of that money based on population and 25% based on miles of roads
· 20% goes to municipalities based on 75% of that money based on population and 25% based on miles of roads
· 15% goes to townships, libraries, fire districts, and TIF districts (until they are paid off)
First of all, look at the 10% into the reserve fund. Let’s say that in the first year, the revenue is at the maximum level of $15 billion (again, $5 billion over current revenue levels). 10% of that is $1.5 billion. So, of the $5 billion, there is still an extra $3.5 billion of new revenue. What happens to THAT revenue? Why are we taking in so much more in revenue?
The next issue I have here is with how rigid the funding for local government projects is. Local governments will not be able to raise any funds for emergencies or unexpected purposes. They will be stuck with whatever the state gives them.
And then there is the issue of the funding being based on population. 95% of Indiana’s population growth has been in SEVEN counties (the five Indy metro counties, the metro Louisville Clark County, and Allen County/Fort Wayne). Most of the rest of Indiana has stagnated or dropped. What does that mean for the small counties when the next census doesn’t change this? Randolph County (Prescott’s home county, also where I was raised) is the top county in the state for receiving more funds than it contributes. Randolph County also has the highest local income tax rate in the state. With Randolph County (and other rural counties) needing so much money from the rest of the state to meet its needs, how will these counties be able to meet those needs when the formula reduces their funding?
And finally, we have how money will be allocated to schools. Currently school funding comes from two sources, general funds out of the bi-annual state budget and property taxes. General budget funds pay for the actual education of students (teacher pay and curriculum). Property taxes pay for operational expenses such as building maintenance, utilities, busing contracts, and loans related to building improvements.
Over the past few years, the general budget funds have become subject to vouchers which allow money to go from public schools only to now being shared with private and charter schools. Property tax funding has only been allowed to be allocated by public schools with private and charter schools. Under this plan, private schools and charters will be allowed to get money which will be taken from public schools. My question to him at the meeting was that with increased costs to everyone in things like utility bills as data centers use more of our electricity and water and such, how are the public school systems supposed to keep up when they are taking money from their revenue? His answer was that they need to find ways to cut their budget UP TO AND INCLUDING REDUCING THE NUMBER OF SCHOOL BUILDINGS. My comment back to him was “or to just close whole school districts like Union Schools in Modoc.” Maybe this is really what he is after.
I want to highlight this point because it continues a drive that was unveiled in a failed amendment to the 2025 SEA-1 property tax law. After the Union School closure amendment, a second amendment which failed was to consolidate all counties with population under 50,000 to one school district. This would mean 57 counties in Indiana would have to consolidate. Delaware would be the only county in District 33 which would not have to consolidate. But if THIS plan would go into effect, Wes-Del, Daleville, Cowan, and Wapahani would have to figure out a way to pay their bills or be forced to consolidate into a larger school district. Yorktown would be a question mark as the property tax revenue is higher than many because of the property values being higher than other districts. Would they be able to hold their wealth factor? Delaware Community (Delta) would probably have to consider closing Albany and Eaton Elementaries. Jay County would probably have to close Redkey and Dunkirk’s Schools. And Randolph County’s districts would certainly have to look at consolidation. Closing schools has a lasting effect on our small town communities as we have seen in Desoto and Montpelier over the past few years. And the effects on our children by having longer bus rides and living further from schools would be very hard on them.
I don’t like property taxes just like no one else likes them. The method for calculating the assessed value of property is flawed, by our legislature’s own doing. I too would like to find alternative means of financing our most basic local needs. Fire and police protection, libraries, local schools, county and city roads, etc. all need to be fully funded. Property taxes pay for things that are more like an insurance policy. They ensure that if your house catches fire, there are fire trucks to come put them out. If someone breaks in and steals things from your house, there is a police force to come investigate. If you need an ambulance, there will be one to take you to the hospital. You need functional roads to get those services to you. Yes, you get billed for some of those services. But that bill does not cover the cost of the equipment. That’s what property taxes pay for.
A big argument against property tax is that they are a tax on “unrealized gains.” This means that there is no benefit from my property. I liken this holding an insurance policy. If my dad bought a pack of 6 baseball cards in 1952 for 5 cents and got the holy grail Mickey Mantle rookie card that sells for $40,000 in horrible shape now, what price should his insurance premium be set with? The less than 1 penny that he spent on the card or the $40,000 it is now worth? That is setting the premium cost on an unrealized gain. The same thing could be said about basing property tax on assessment value. You bought the property expecting that value to increase. If a loss happens to the property, you expect to be reimbursed for the value of that property and not what you paid for it. And you expect the fire truck or police department to come when you need it. Why do we expect that we should pay into the system for what fire trucks cost 30 years ago when we bought the property?
How do I think we can “fix property tax?”
First of all, I think the assessment process is very broken. We are required by law to base the assessment value on market value due to a Supreme Court legal decision. The process was devised by the Indiana Legislature in 2018. There is a book which you can download from the Department of Local Government Finance which defines the process. It is a mathematician’s nightmare to understand. But a full assessment must occur to every property every four years. That assessment is a pinpoint in time and does not allow for spikes in the market (such as the sub prime mortgages leading up to the crash in 2008 or the hyper sales in the COVID era of 2020-2024). My thoughts are that we need to take an average of several points to smooth out the curves and get a much truer picture of what the market value of property is.
Secondly, I believe that another issue with assessing market value is that the process is outsourced to agencies who are not using good data points of sales of clearly similar properties. They use properties in other markets and different features. A 4 bedroom/2 bath house in our rural communities built in 1915 is not going to be the same value as a 4 bedroom/2 bath house built in 2001 in a cul-de-sac in Carmel. This needs to be fixed.
Finally, I think that the main thing people have issues with on property tax is that it is the only tax we pay in lump sums twice a year. Sales tax gets paid at the cash registers with every purchase. Income tax gets paid with every paycheck before the money ever hits the bank. Property tax is something that most people without mortgages pay twice a year with a huge sum that has to planned for. And, as we all know, if you don’t pay your property taxes, the county can confiscate and sell your property out from under you. When you have a mortgage, your property tax amount is built into your mortgage payment monthly. I would like to create some type of an easy system where property owners can opt into having a small amount of money paid into each month like a regular bill to pay that property tax when it comes due in May and November. It takes the sting out of writing a huge check twice a year and as long as payments are made into it, property tax will be kept current, and the danger of property confiscation will be eliminated.
If you’ve read all of this, I think it is clear that I’ve done the homework on trying to make sense of property tax and the absolute insanity of the plan to replace it with a tax that will cost all of us more. Property taxes are one of the more complex issues I’ve tried to understand. Prescott’s bill isn’t a great plan, it is a horrific one. We will all have buyers’ remorse if we do it as we will all have less to do things in the end. In the meantime, we can make changes to our property tax system that makes sense and is much fairer to all.
