Property values key element of state campaign

Gov. Frank O'Bannon and Rep. David McIntosh, the Republican and Democratic candidates for governor, have sparred for months about plans to cut property taxes after property values are reassessed next year.\nMcIntosh vows to cut property taxes 25 percent from what they are now, before reassessment.\nO'Bannon argues the cut is impossible without chopping necessary government programs and says he will keep property taxes about where they are now, with the average homeowner paying $1,100.\nMike McNeily, a junior, said his landlord already told him the rental rate for his apartment would rise with higher property taxes, but McNeily said he doesn\'t expect the landowner to reduce his rate if either candidate cuts property taxes.\n"I bet you they'd still screw me," McNeily said.\nAssociate economics professor Jean Rotella said students have more power than they think over who actually pays taxes. Landowners will try to pass on higher taxes to students who rent apartments and keep tax cuts for themselves, he said. But the increase in Bloomington apartments in the past few years and Willkie's new suites and apartments give renters choices and makes landowners have to compete for their business, Rotella said. \n"Competition constrains everybody," Rotella said. "Certainly (students) are going to get some of the benefits."\nBut the candidates have to get their property tax plans implemented first.\nTwo years ago, the courts ordered the state to provide a manual by December to reassess property values in Indiana. This is the first time in about a decade that reassessments will occur.\nProperty owners and government officials expect reassessment to fix unequal values on properties that have been used to figure taxes. The new values will also include inflation. The result will be higher property values, which means higher taxes.\nBoth camps estimate reassessment will raise property taxes about 33 percent, with homeowners bearing the brunt of the raise. Property taxes provide the majority of local governments' funds.\nCandidates have two options to lower taxes once reassessment is done and property values increase. They can lower the tax rate on property, which would decrease the money local governments get, or they can increase the state property tax replacement, which is the portion of the tax the state pays in place of the property owner.\nMcIntosh plans to use the second option. The reassessed land will raise the property taxes paid in 2003. McIntosh wants to protect homeowners that year with a homestead credit, which would pay about 10 percent of the bill. Once he sees how much property taxes increase, McIntosh will raise the homestead credit to cut property taxes by an average of 25 percent from what homeowners pay now.\nMcIntosh said the tax cuts give homeowners more freedom to spend their money how they want to.\n"I believe in freedom a great deal," he said. \nO'Bannon said the state government cannot afford to subsidize local property taxes that much without sacrificing state programs.\nLeah Dietrick, a spokeswoman for the McIntosh campaign, said the state government would pay for the homestead credit by reducing the growth in state spending from 8 to 9 percent each year to 1 percent above the rate of inflation, which is 3.5 percent. She said the state did that in the 1970s and 1980s. She said the McIntosh administration would also manage the budget better than O'Bannon has and would cut $70 million out of the government's overhead costs.\nO'Bannon said the cut would chop state funds for environmental programs, in-home health care and other services.\n"(McIntosh) either has to raise (state) taxes or … remove basic services for the people of the state of Indiana," O'Bannon said.\nO'Bannon said he will provide a shelter allowance, which will reduce the assessed value and taxes people pay on property they live in. He also will cut the portion of the property tax that goes to welfare and pay for it with state funds instead. The third part of his plan will change the depreciation rate of personal property, which will reduce the taxes homeowners pay. O'Bannon expects his plan to keep property taxes about the same as before reassessment.\nThe property tax debate and pending apartment rates still do not affect some IU students' vote.\n"I've already decided who I'm voting for for governor," said Andrew Bowers, an IU alumnus who rents a house on First Street with three IU students. "Property taxes do not affect who I'll vote for"