An Indiana Republican lawmaker has been holding town halls across the state, pitching his plan to end property taxes.
A tax on property would be replaced with a seven percent tax on services. The service tax would exclude education and healthcare services.
Rep. J.D. Prescott’s (R-Union City) plan would put a new service tax on things like haircuts and oil changes. He said that tax would effectively replace the money generated from property taxes.
Speaking at a town hall in Pike Township this week, Prescott said he believes too many are exempted from property taxes under current law. He proposes changing to a service tax would solve that problem.
“So you're moving from a system that ends up shrinking your assessed valuation base; those that pay the property taxes pay a larger share of the burden year over year, to a system where everybody pays based on affordability,” he said. “Moving from a wealth-based tax to a consumption-based tax.”
Taxes from services would be collected by the state and then sent back to cities, townships, and schools through a funding formula. That formula would weigh population and miles of roadway in order to determine how much comes back to municipalities across the state.
The plan would also eliminate the local government’s ability to create TIF districts, which often provide tax breaks for companies
During a lengthy question and answer period Prescott explained that his plan is still in the early stages and he has a long way to go to get his fellow republicans on board.
“It's a monumental undertaking to repeal and replace the property tax system,” Prescott said. “I believe it's doable, but it's going to take a team and it's going to take a mission.”
The effort to eliminate property taxes has seen growing traction in Indiana. It was recently added to the platform of the state’s Republican party.
Other states, including Wyoming, are looking to reduce or eliminate property taxes.
Prescott believes he has momentum because many people across Indiana aren’t happy with the current tax structure.
He said the state would need to keep more money in reserves to help protect itself from economic downturns, when fewer services might be purchased.
Jake Terpstra is a Pike Township resident who attended the town hall. He said as a homeowner he’s excited by the idea - but worries that the change would impact many of his friends who have struggled to buy property.
“I would say, where does the burden end up?” He said. “Do we have a clear picture of that, and are we going to create more problems with a shift?”
Still, Terpstra said he’s excited about simplifying the tax system.
“If we can get towards that end, then I'm fully on board,” he said. “You know, just how often does the government get less complex? That's my concern.”
Contact Government Reporter Benjamin Thorp at bthorp@wfyi.org
