Indiana Constitution Amended to Cap Property Tax

On November 2, 2010, approximately 72% of Indiana voters approved a constitutional amendment capping property taxes on all property classes.  The amendment provides that property taxes will be capped at 1% of the assessed value for residential property, 2% for apartments and agricultural land and 3% for commercial property.  Such property tax caps have been effective since January 1, 2009 as they were adopted by the Indiana legislature in 2008; however, the amendment to the Indiana Constitution makes it more difficult for future legislatures to amend or revoke the property tax caps. 

Although effective property tax rates differ among taxing districts in Indiana, the average effective property tax rate statewide is currently lower than the tax cap for each property class, according to the Indiana Department of Local Government Finance.  The Constitutional amendment continues to allow local residents to vote to approve increased property taxes for special purposes, such as capital projects and school operating costs.  If property tax cap rate levels are reached in the future and local residents do not approve higher property tax rates, the usefulness of TIF may be impacted because the property taxes, and therefore the amount of tax increment generated, would be limited.

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