Tax plan may violate constitution

By Tim Evans and Jeff Swiatek
tim.evans@indystar.com

The constitutional amendment in Gov. Mitch Daniels' property tax plan is not just designed to make the tax cut permanent -- it's there to make it legal, too.

Without an amendment, the governor's plan to cap property taxes at different levels for homeowners, landlords and businesses could find itself on the losing end of a constitutional challenge, legal experts say.

And because more than one powerful business interest has lined up against the plan, the politically difficult two-year task of amending the state constitution appears essential.
At issue: whether the caps, welcomed by residential property owners but not by business interests, meet the constitutional requirement that taxes be assessed at a "uniform and equal rate."

The caps would limit annual property tax bills to 1 percent of assessed value for homeowners, 2 percent for landlords and 3 percent for businesses, and are a key component of the tax reform plan unveiled last week by the governor.

With the legislature's help, Daniels hopes to have the caps take effect in 2009, and he has proposed writing the limits into the state constitution. The earliest a change can be made to the constitution is 2010.

Article 10 of the Indiana Constitution says: "The General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation."

"It does seem to me that when one class of property owners pays three times the amount of another, that is not uniform or equal," said Indianapolis attorney Thomas M. Atherton, a constitutional law expert.

Atherton, who was the lead attorney for the plaintiff in the St. John court case that led to sweeping changes in the property tax system in 2002, said he thinks it's likely that some business group will raise the constitutional question.

"The fact that the governor acknowledged the need to amend the constitution is evidence, I think, that until it is amended, you have a serious constitutional issue," he said.

The window for any such challenge would begin after the legislature enacts the caps. It would end if the proposed amendment took effect, Atherton said.

Once an amendment is adopted, he said, the issue becomes moot because there would be no constitutional grounds to challenge the caps.

Read more online at the Indystar.