SB 1 and HB 1461 are more related than you may think
Editor’s note: This story was published in the March 21, 2025 edition of Indiana Transportation Insight before the House made changes to SB 1.
SB 1, the belle of this session’s ball, would give Hoosier property owners a tax break, along with a myriad of other provisions such as establishing a property tax transparency portal and hard limits on how high local governments can boost their budget year over year – specifically, a 1.0% increase cap in 2027 and 2.0% cap in 2028 – at least under one of three versions already considered. For taxpayers, this is an attractive, common-sense proposition.
Here’s the rub: Every government official, to some degree, seems unhappy with the current iteration of the bill. Governor Mike Braun (R), who directed the General Assembly to achieve homestead property tax relief as one of its chief priorities this session, doesn’t believe recent iterations of SB 1 will provide enough relief for homeowners. He’s in it for relief, and isn’t concerned about replacement revenues for school districts and local units of government, suggesting that they largely just tighten their respective belts and turn to other tools in their local fiscal toolkits to backfill lost property tax dollars.
Meanwhile, legislators are also receiving strong feedback from municipalities about the ability to maintain their communities if critical funding shrinks, and they are looking at more targeted relief (the Senate favored tax breaks for veterans, the elderly, and first-time homeowners). A Monday rally for property tax relief (or just against property taxes in general, depending on how you look at it), at the State House, attracted enough protestors to fill the third floor and was attended by the Governor and by Lieutenant Governor Micah Beckwith (R).
Rep. Andrew Ireland (R) of Indianapolis perhaps described the public’s mindset the most vividly at the rally: “[W]hen these local leaders come to [the Statehouse] and they tell us ‘There is nothing to cut. The sky is going to fall if you cut anything,’ it sure smells a lot like [my newborn’s] green, dirty diaper.” Marshall County Commissioner Jesse Bohannon (R) – an unsuccessful House candidate in 2016 and 2018 – added that he believes the state government has “billions of dollars locked up,” ill-gotten gains from Hoosier taxpayers. He told the State House rally crowd that “during my time as a local official, I’ve learned something: Our system is so broken, it prevents us from cutting property tax. It’s on autopilot.”
As of right now, House Committee on Ways and Means Chair Jeff Thompson (R) of Lizton offered an amendment that would create lower property taxes but would disperse the burden of the cuts over time, and it would establish a new local income tax (LIT) system.
The problem is, not many – and that’s generous – comprehend how Rep. Thompson wants to do that, as was apparent when he presented his proposal before Ways and Means and left even some of the best and brightest members scratching their heads, as our Hannah News Service sister newsletter INDIANA LEGISLATIVE INSIGHT explains.
Rep. Thompson presents a complex solution that would take a lot of time to understand that legislators may not have this session. He’s also not convinced that he’s yet hit the sweet pot he’s searching for, and those who know him well over his 27-year legislative tenure know that he’s going to keep going back to the well for more data runs to determine the likely impact on every school corporation and city and county under assorted tweaks to his scenarios . . . and his solution isn’t even necessarily close to what we may end up with in a few short weeks.
Meanwhile, as local governments are trying to fend off potential revenue losses from any version of property tax changes, transportation aficionados are chiefly concerned with HB 1461, the road funding bill we’ve extensively covered that now faces further scrutiny in the Senate Committee on Homeland Security and Transportation.
Anyone who is keeping an eye on that bill, however, should also keep an eye on SB 1. Property taxes finance local governments – and local infrastructure. This means they play a role in funding bridges, transportation facilities, and some infrastructure maintenance. That’s without getting into how a deficit in one form of taxation could place future strain on another (or shift a given burden from one group to another, such as property taxation from residential homestead taxpayers to business or agricultural landowners, or favor homestead owners over landlords).
Based on the findings of the Funding Indiana’s Roads for a Stronger, Safer Tomorrow Task Force this summer, every cent matters.
Gov. Braun’s original property tax relief proposal would’ve equated to funding slashes of $4 billion over three years. When legislators balked, he responded that governments need to “prove” that they haven’t gained excess from Indiana’s admittedly high property taxes in the last couple of years – but we’re not sure what that process would look like. ”I was disappointed in that they probably were listening a little bit too much to getting their ears bent by the lobbyists that represent local governments and school districts,” the Governor said of senators who largely ignored his proposed relief package.
HB 1461 posited a similar mandate to municipalities. Recall the back-and-forth between House Committee on Roads and Transportation Chair Jim Pressel (R) of Rolling Prairie and Knox County Commissioner Kellie Streeter (R) – the immediate past president of the Indiana County Commissioners Association and– regarding the perception of large stashes of local “rainy day funds.” Streeter, herself an unsuccessful legislative candidate last year, asserted that those hypothetical piles of extra cash simply are not there. While HB 1461 has since been amended to address that, it’s worth noting that the perception of “billions of dollars” being “locked up” seems to be treated by some legislators and stakeholders as a fact. That perception is already impacting several communities.
One Size Doesn’t Fit All
Carmel Mayor Sue Finkam (R) asserted before a Senate panel in February that the property tax measure, if approved as it then stood, would lower the quality of life for Hamilton County residents. Carmel has been making major, expensive moves in roads and infrastructure over the last decade – so much so that Japanese sister city Kawachinagano saw how effective the city’s infrastructure was in promoting tourism and began implementing roundabouts throughout its streets in emulation. A double-whammy of property tax cuts and tough road funding decisions may make a considerable dent in Carmel’s progress.
Bloomington also prevents an interesting dilemma when it comes to road funding. As a college town, its population expands and contracts throughout the year, making it harder to accurately estimate maintenance costs. This plays into both property and gas tax revenue, too. West Lafayette’s status as a Purdue University hub creates a similar problem.
Johnson County may represent the most salient case study on the chaos of road, bridge, and infrastructure funding. Johnson County Daily Journal reporter Elissa Maudlin’s coverage of a recent presentation by Johnson County Highway Department Director Luke Mastin revealed that the county-wide capital road projects’ price tag of $382 million, an estimate set three years ago, is now $530 million. For more specific coverage on the projects included in that $530 million bundle, see our previous issue.
All of this debate about local cost-cutting is coming amidst a local clamor for fixing potholes, adding new roads and amenities such as roundabouts and flyovers and lanes to accommodate growing populations and traffic patterns, and uncertainty about the economy, tariffs, and supply chains.
About the only thing that local elected and public works officials are not concerning themselves with are egg prices – though some do feel as though they are walking on the proverbial eggshells.
A myriad of factors caused this outcome, from inflation to strict parameters on what monies can be used for road funding to the Community Crossing formula caps, but perhaps the most dramatic variable is the availability of tax funds that are supposed to power some of these projects. After a 2022 plea, Johnson County Council granted additional funding to the highway department including $3 million from the county’s Rainy Day fund (illustrating Rep. Pressel’s point about cash piles – maybe “Rainy Days” need to be better defined). The county council also that same year increased the local income tax by 0.2% by passing an Economic Development Income Tax to bring in about $4 million more per year that the county can put toward roads.
Mastin asserts that the county needs to use bonds to increase its funds by $140 million to cover the most urgent projects. Bonding also frees up $8 million that is usually allocated for ongoing projects to be used instead for “immediate maintenance.” The county is waiting for the end of the legislative session, however, before utilizing bonds.
Debt service, of course, is another issue cited by local officials when property tax revenue cuts are dangled; they have been trying to explain that many jurisdictions have bonds that must be paid off, and that becomes eminently more difficult with revenue restrictions.
The four highest-priority projects for Johnson County include widening Smith Valley Road in White River Township to four lanes from S.R. 135 to I-69, completing two frontage roads on the east side of I-69, and completing the Worthsville Road connection from east of Greenwood to Shelby County. Worthsville Road is particularly critical, as the improvements fortify the area against semi-truck traffic.
Johnson County now must rely on federal funding to revitalize two dilapidated bridges, which must be finished before Worthsville work can start. C.R. 144 construction, another important project for the county, isn’t on the local funding list because Mastin is hopeful it can be funded through the Feds’ BUILD grant program.
Creative but less concrete revenue streams are necessary when local funding falls through. If officials tried to repair and maintain all of Johnson County’s 600 miles of road, Mastin tells Maudlin that the price tag would be “unreachable.”
Johnson County is also one of the handful of Hoosier communities that have implemented a wheel tax without HB 1461 threatening their Community Crossings funding if they don’t. The county doesn’t have their wheel tax set at the maximum, however. Mastin felt that the registration fee assessments are “somewhat unfair,” so asking for the highest amount possible would be, too – perhaps illustrating Commissioner Streeter’s point about the importance of local tax control.
Lessons . . . Learned?
Gubernatorial hopefuls campaigning on reducing costs for taxpayers is nothing new (“Axe the tax,” anyone?), and the last three governors have promised some degree of relief for taxpayers.
Gov. Mike Pence (R) told voters to expect a 10% income tax cut; Gov. Eric Holcomb (R) pushed for broad-spectrum tax tweaking, cementing it in the same context we are discussing now – road funding.
In many cases, such proposals were not entirely accepted by the General Assembly. In Gov. Pence’s case, the proposal reached a complete standstill with lawmakers unwilling to budge until close to the end of session, where an emergency compromise was reached with a 5.0% slash.
Years ago, Gov. Holcomb attempted to navigate these choppy waters while talks of raising the gas tax were happening behind closed doors, telling the Indianapolis Star that “the fact is, existing sources of revenue are just not keeping up. Now, I’m a big believer that every time you ask a taxpayer for a dollar, you better be darn sure you need it and are going to use it effectively for its intended purpose. Here’s a case that if we ask Hoosiers to invest a little more, to meet the need … the return is going to be well worth it for them, for our communities, and for our economy.”
Notice the lack of explicitly mentioning taxation at all. In the midst of some controversial HB 1461 provisions, Senate Committee on Homeland Security and Transportation Mike Crider (R) of Greenfield is being equally careful to frame them in the context of “at least we aren’t raising the gas tax.”
In an interesting dichotomy, HB 1461 intends to address a deficit caused by keeping gas taxes low; SB 1, especially Gov. Braun’s preferred version, would constrict property taxes, regardless of the holes that would poke in government coffers. Gov. Braun’s version of SB 1 would provide no obvious replacement revenue for local units, so who’s to say other sectors won’t have to raise taxes to make up the difference in the future?
Consumer Affairs recently ranked Indiana as the U.S. state with the best road conditions. The metrics factor in a low traffic fatality rate (in terms of state-wide numbers) and “impressive” road quality. Consumer Affairs attributes the win to Indiana’s “commitment to infrastructure maintenance,” particularly through its Community Crossings Matching Grant funding.
Meanwhile, Inside the Limestone, concern over how to fund the Crossroads of America grows, creating a long journey for any version of either SB 1 or HB 1461 to make it to the Governor’s desk. The juxtaposition implies that ranking is teetering on a razor’s edge, its fate depending on legislators not making the wrong decision this budget session – or, in the face of that ticking clock, 200-page bills, and disparate priorities – not making one at all.