Indiana's Property Tax Caps: Old Idea, New Approach, and Surprising Incentives

Abstract

Property tax limits are a subject of continual interest among policy makers and scholars, but their implications for overlapping local governments are often unexplored. Indiana recently implemented tax caps that limit individual property tax burdens to a fixed percentage of market value. The resulting system creates structural deficits that depend on the simultaneous spending choices of all overlapping local governments. This paper highlights similarities and differences to other state systems, the many unusual incentives which spring from this system, and some prospects for future public finance research.