Morton Marcus: Is there a future for property tax?

Retentive readers will recall Gross Assessed Value (GAV) is purported to approximate the market value of all taxable residential, commercial, industrial, and agriculture properties.

Sum up the GAV of all the properties in your county and you’ll have the county’s GAV. The sum of the counties would tell us the desirability of Indiana as a place to live and operate a business.

If GAV is all these things, it should be a target metric for state and local economic developers. GAV may not be comparable across state lines, but it should be comparable across county lines. If county assessors are following the manual of the Department of Local Government Finance, and if DLGF is auditing those valuations, the following should be of interest.

The GAV of Indiana rose by an average of 2.05% over the past ten years. Leading the state in GAV growth were Benton, Boone, Knox and Hamilton counties, each above a 4% average annual growth rate. Trailing all counties were Switzerland, Ohio and Vanderburgh, each exhibiting a very small average annual decline of less than 0.4%.

Growth alone, however, should be considered with variability, the year-to-year changes in growth rates. Very small rates of growth or decline will inflate variability ratings. Case in point: Vanderburgh County ranked 90th among 92 counties in average GAV growth rate and first in variability.

When politicians quote annual growth rates, Indiana Republicans are likely to quote a respectable average annual GAV growth rate above 2% for the past decade they were in office. The out-of-office Democrats will say the state actually fell well below that 2% rate of growth.

Both sides are correct because the rates they use are calculated differently. The Republicans have a 2.05 rate computed as the average of each separate annual growth rate. The Democrats are using a 1.97 rate, a compound average smoothly connecting the first and last years.

If the Democrats are on their game, they’ll stick the average national inflation rate into the mix. That’s a 1.73% rate over the same period They’ll proclaim Indiana’s compound average annual GAV growth rate 1.97, when adjusted for inflation, was a real annual growth rate of only 0.24%.

We believe the purpose of assessing property is to develop a base for collecting revenues local government can use to provide services to local people. Between 2010 and 2020, Indiana’s population grew by less than 0.45% per year while real GAV advanced by only 0.24%.

Thus, the property tax base for our communities is not growing fast enough to support our very slow growing population. That’s before we take into account the massive legislative deductions which further erode the property tax base.

Is the idea to rid Indiana of the property tax and/or make local governments vassals of the state?

Morton Marcus is an economist. Reach him at [email protected]. Follow his views and those of John Guy on Who gets what? wherever podcasts are available or at Send comments to [email protected]