Indiana Lawmaker Proposes Overhaul of Property Tax System
LOUISVILLE, Ky. – Indiana legislators are considering a significant change to the state’s tax structure, aiming to abolish the property tax system completely. In its place, Republican state Rep. J.D. Prescott is promoting a 7% sales tax on various services.
Currently, Indiana generates around $10 billion from property taxes each year, a vital source of funding for public education, safety, and infrastructure development. This tax revenue plays a crucial role in supporting local government budgets.
Under Prescott’s proposal, consumers would pay a 7% sales tax on labor-intensive services, areas that currently enjoy a tax exemption. These services could cover things like landscaping, construction work, legal fees, and even haircuts; however, a fully detailed list is still being worked out.
He drew a comparison to car maintenance, noting that while sales tax applies to parts like oil and filters, it doesn’t currently apply to the labor involved in the service.
Interestingly, Prescott began this initiative doubting its feasibility. “I wanted to demonstrate why it can’t be done, but once I saw the numbers…” he reflected, suggesting that it’s indeed possible to make this change.
Exemptions will still be in place, specifically regarding medical services, as well as many nonprofit, educational, and religious services. Prescott emphasized that the aim is to create even treatment for public and private education.
According to estimates from the state Legislative Services Administration, this new service tax could bring in between $13 billion and $15 billion annually, surpassing the expected property tax collection of about $10.6 billion for the next year.
“Considering that, homeowners could end up paying less overall while actually having more disposable income,” Prescott stated.
Lanesville resident John Austin finds this plan attractive. He currently pays over $4,000 each year in property taxes, funds he feels could be better utilized elsewhere. “I’m really on board with this,” he said.
The transition to this new system, however, will not be quick; Prescott noted that it will require at least two years to fully implement the changes. The plan aims to streamline county operations by reducing the administrative workload associated with property tax collection, which he estimates could save both state and local governments between $150 million and $200 million.
The current proposal suggests that property taxes would remain until 2028, while the service tax would be introduced on July 1 of that year. There will be a brief overlap period to establish a financial buffer before fully phasing out the property tax.
Prescott indicated that the proposal is still in development. Should it be approved by the Indiana General Assembly and signed into law, the entire transition would take a significant amount of time to finalize.
