State Rep. Jeffrey Thompson, who chairs the House Ways and Means Committee, presented the committee with his proposed property tax plan Wednesday.

As the House considered Senate Bill 1, a property tax reform bill, Thompson decided to strip the bill and insert his 228-page House Bill 1402, which wasn’t heard in committee in the first half of session. Thompson, R-Lizton, said the hallmark of House Bill 1402 is a 5-year phase-in of exemptions and deductions so that every parcel in the state hits the property tax cap. Thompson’s plan calls for some deductions for homesteads to be replaced, lowering business personal property tax floors and shifting the authorization of local income taxes.

“The alternative is keep the system we got. If we like the system we got, then we get the results we should expect,” Thompson said.

Gov. Mike Braun, who campaigned on property tax reform, proposed a homestead standard deduction amount of 60% of the homestead’s assessed value if the value is more than $125,000 or $48,000 plus 60% of the remaining assessed value if the homestead has an assessed value of $125,000 or less. That language was introduced in Senate Bill 1.

Braun’s plan would cut $4.1 billion across the state between 2026 and 2028, including $1.9 billion from schools, $254 million from libraries, $890 million from cities and towns, and $765 million from counties.

The Senate amended Senate Bill 1 to remove Braun’s language from the bill. The amended bill would shift the percentage cap used to determine the maximum levy growth quotient to 0% in 2026, 1% in 2027, and 2% in 2028; and allows a county fiscal body to establish a property tax payment deferral program, where up to $10,000 can be deferred and the deferment becomes a lien on the property.

Senate Bill 1 also offers relief to those 65 years old and older and those who are disabled. It also establishes a first-time home buyer tax credit. It allows for local governments to utilize a levy referendum during even-year general elections.The fiscal impact of the amended bill would cut $1.4 billion across the state between 2026 and 2025, including $370.9 million from schools, $67 million from libraries, $304.3 million from cities and towns, and $346.6 million from counties.

Thompson’s bill phases down the homestead standard deduction over 5 years to 0 beginning for taxes due and payable in 2031; phases in an increase in the supplemental homestead deduction over 5 years to two-thirds of the assessed value of the homestead; establishes a new local income tax expenditure tare for all counties to 2.9%; and phases in a total exemption for business personal property that is placed in service after Jan. 1, 2025.

When it comes to deductions for those over 65 years old or military service members, Thompson said he’d change relief proposals to credits.

The fiscal impact of Thompson’s bill would cut $362.8 million across the state through 2028, including $76.7 million from counties, $147.2 million from cities and towns, $186.2 million from school corporations, and $2.1 million from libraries.

Rep. Hal Slager, R-Schererville, said the challenge with property tax reform is dealing with “the fear of the unknown.”

“This is not easy,” Slager said. “We need to be able to follow through exactly what these impacts are going to be.”

Rep. Jack Jordan, R-Bremen, said while it isn’t easy, “we can work together, roll up our sleeves, all of us, and try to improve this.”

Rep. J.D. Prescott, R-Union City, said Indiana should set a certain date to end property taxes and find other revenues to fund local governments.

“I think it’s possible to get us out of the property tax system completely and replace it with a better system,” Prescott said. “I don’t think anybody in their right minds would look at the taxing structure that we have today and if you were to hit the reset button, rewrite it the same way.”

Rep. Cherrish Pryor, D-Indianapolis, said the legislature has taken on the responsibility of funding education but hasn’t been properly funding education. That has resulted in schools relying on referendums, which increase property taxes, to fund their budgetary needs, she said.

“It’s incumbent on us as a legislature to look at the fact that we have a surplus but we’re forcing communities to take these referendums out and to rely on the referendums and then we wonder why the property tax bills are so high for individuals,” Pryor said.

Over a dozen people testified on the bill Wednesday, most sharing their concerns about its impact on local communities.

Campbell Ricci, policy director for Accelerate Indiana Municipalities, said the organization has supported having local income tax decisions decided at the city and town level and not relying on the county for those decisions.

AIM has concerns with the business personal property tax component because it could shift the fiscal responsibility to other taxpayers, Ricci said.

Columbia City Mayor Ryan Daniel said city and town leaders have “heartburn” over the proposed phasing out of business personal property tax. Cities with a more industrialized base have a higher business personal property tax, while cities with fewer industrialized businesses have a lower business personal property tax, he said.

In Columbia City, 7% of its tax revenue comes from business personal property tax, while 13% of its county’s tax revenue comes from business personal property tax, Daniel said.

“Use a scalpel rather than an axe, please, on the property tax issue. Cities and towns across the state continue to invest in quality-of-life amenities that our residents and businesses want,” Daniel said.

Ryan Huff, director of government relations for the Association of Indiana Counties, said the organization supports the proposed local income tax system because it would allow counties and cities to “manage their own tax revenue environments without interfering in each other’s local income tax landscape.”

The House Ways and Means Committee will continue to discuss the bill.

akukulka@post-trib.com