Why It Matters
Indiana legislators are advancing a proposal to eliminate property tax bills for homeowners by shifting the revenue burden to local income taxes. This structural change would alter how Hoosiers fund local government services while addressing concerns over rising housing costs.
What Happened
Approximately 300 residents gathered in Warsaw, Indiana, on Tuesday night to hear proposals regarding the elimination of property taxes on primary residences. The event featured three high-ranking legislators and a dozen other lawmakers who outlined strategies for reducing homeowner tax burdens.
Sen. Ryan Mishler (R-Mishawaka), chair of the Senate Appropriations Committee, stated that completely eliminating property taxes is unrealistic because local governments rely on this revenue to service $54 billion in debt. Instead, Mishler proposed allowing local governments to increase income tax rates to fund a 100% credit against property taxes for owner-occupied homes.
The credit would be phased in over five years. Mishler noted that all but 14 counties currently have the capacity to cover the full homestead property tax amount under this model. The remaining counties will gain capacity due to reforms passed by the Legislature in 2025, known as Senate Enrolled Act 1, which limits the growth rate of local property taxes.
Mishler cited Koscius County as an example, noting it would need to cover $44 million in homestead property taxes under the new system. He emphasized that the proposal avoids shifting tax burdens to agricultural or business properties. A 100% credit results in a zero bill for homeowners, though the underlying tax obligation remains due to bond requirements.
The proposal does not apply if a community approves a referendum for additional property taxes for school districts or other entities. Attendees questioned why excess state revenue is not returned to counties and argued that local property taxes support public safety services.
Sen. Chris Garten (R-Charlestown), who will become Senate president pro tem after the November election, stated that local elected officials must justify needing more money from taxpayers. Mishler acknowledged he would likely pay more in income taxes than he saves on property taxes due to downsizing his home.
By the Numbers
$54 billion — Local debt backed by revenue statewide
100% — Proposed credit percentage for owner-occupied home property taxes
Five-year period — Duration for phasing in the tax credit
14 — Number of counties lacking current capacity to cover full homestead amounts
$44 million — Amount Koscius County needs to cover in homestead property taxes
$4.1 billion — Property taxes on owner-occupied homes in 2025
38% — Share of statewide property taxes from owner-occupied homes in 2025
$10.6 billion — Total statewide property taxes billed during 2025
7% — Current state sales tax rate proposed for extension to services
Zoom Out
Property taxes on owner-occupied homes amounted to nearly $4.1 billion in 2025, representing 38% of the $10.6 billion in statewide property taxes billed that year, according to a Legislative Services Agency report. The debate reflects broader national discussions about shifting tax burdens from property to income or sales sources.
Another proposal by Rep. Craig Snow (R-Winona Lake), vice chair of the House Ways and Means Committee, suggests eliminating all property taxes and extending the state’s 7% sales tax to untaxed services such as haircuts, construction labor, and lawyer fees. Snow stated that lawmakers moved property taxes from a levy-based to a rate-based system in 2025.
What’s Next
Snow hopes another step can be taken in the 2027 legislative session, estimating a timeframe of three or four years for implementation. The proposals will likely face scrutiny from local officials and homeowners as lawmakers evaluate the fiscal impact on municipal budgets and service delivery.