There are times where perception does not depict reality.
The Circuit Breaker in House Bill 1001 appears to present a reduction in the property taxes residents have to pay, but there are hidden stipulations within the more than 800 pages of text.
"Next year, the Property Tax Replacement Credit (PTRC) will be no more," Clay County Auditor Mary Jo Alumbaugh said. "Also, the Homestead Credit will be reduced and chances are the additional Homestead Credit will be gone as well."
The Circuit Breaker states that homeowners will have a 1.5 percent cap on their property taxes in the 2008 pay 09 tax year and a cap of 1 percent in 2009 pay 2010. This sounds good in principal, but does not make a significant impact on the residents of Clay County.
"Currently, about 90 percent of Clay County homeowners would be under the 1 percent cap as it is," Clay County Council President Mike McCullough said. "But with the dissolution of the PTRC and reduction in the Homestead Credit, more residents are going to feel the effect of the Circuit Breaker, but they will be paying more in property taxes in the end."
Residents will not have to pay taxes above the cap, but the county and all entities that use property tax monies will be losing out on revenue necessary to efficiently operate.
"Essentially, local governments are slowly being forced to enact Local Option Income Taxes (LOIT) upon its residents," McCullough said. "The tax would be necessary in order to maintain the services entities provide without having to lose employees."
McCullough added that he and the council are looking into how they could utilize the LOIT with the least impact on taxpayers.
"I am hoping we never have to start a LOIT because it will hurt the working people the most," he said. "If we do have to start one, I'm thinking it would be when we have no other choice in order to keep the county running."
One of the possibilities if a LOIT were enacted is a maximum of 1 percent on workers' gross salaries.
"If a working couple makes $60,000 combined and own a home with an assessed value of $55,000 after the deductions, they would be paying to have lower property taxes," McCullough said. "The maximum they would pay under the 1.5 percent cap would be $825 and $550 the next year, but with a 1 percent LOIT, the couple would pay $600 a year to save $275 on their property tax bill."
However, all of this stems on if no changes are made to House Bill 1001 during the next General Assembly.
"There is a possibility that everything could change during the next session," Alumbaugh said. "They rushed to get the bill signed in the last hours on the last day, so anything could happen."
Whatever may happen, McCullough has noticed a trend of putting out items that appear great on the surface, but are not what they are cracked out to be.
"The Circuit Breaker caps were enacted to solve major property tax problems in five counties," he said. "However, the potential upcoming impact on the rest of the counties in Indiana, including Clay County, is very uncertain at this time.