TERRE HAUTE — Federal property tax relief enacted two years ago should be made permanent and caps limiting that deduction should be removed or raised, said U.S. Sen. Evan Bayh in a stopover Thursday at the Terre Haute International Airport-Hulman Field.
Bayh sponsored legislation two years ago that allows non-itemizing taxpayers to claim a deduction on state and local property taxes, but the federal deduction, which the senator jokingly called the “Bayh line” on tax forms, was capped at $500 for an individual and $1,000 for a family.
Now, Bayh hopes to lift the caps and permanently enact the deduction, which currently must be renewed each year by Congress.
“If we don’t get this reauthorized, this [deduction] will go away and your property taxes will go up, for those of you who don’t itemize. And we don’t need property taxes going up, making it harder to make ends meet during these difficult economic times when many families are struggling with all the different burdens that exist today,” Bayh said.
“I propose we lift the cap and make it permanent,” the senator said. “Regardless of what you pay, you will be able to deduct the full amount. So for about 180,000 homeowners across [Indiana], they will actually get more in property tax deduction than they are currently getting because they are capped …”
As many as 20 million homeowners nationally could benefit from the proposed legislation if they filed for the deduction, according to the Congressional Research Service. Nearly 568,000 of those are in Indiana.
A non-itemizing family with a $75,000 taxable income and a $3,000 property tax bill would receive a $750 tax cut. A non-itemizing senior citizen with a $35,000 income and a $1,500 property tax bill would see a $225 tax cut.
For a non-itemizing single taxpayer with a $50,000 taxable income and a $2,000 property tax bill, it would mean a $300 tax cut.
Roughly one third of taxpayers itemize, gaining access to tax deductions that non-itemizers cannot claim, such as deductions for mortgage interest and charitable contributions.
Joseph and Janet Jones of Terre Haute told Bayh they support the measure, as they are facing a $300 increase in their property tax bill, which will hit their mailbox early this month.
Janet Jones works for the Vigo County Sheriff’s Department, while her husband is retired. The couple, homeowners for more than 20 years, do not file an itemized tax return.
The proposed legislation would result in $3.2 billion less in federal revenue, but Bayh said that can be offset by cutting $7 billion in earmarks.
“It is just a question of which are you in favor of more, the earmarked, pork-barrel spending or property tax relief for middle-class and senior citizens,” Bayh said.
“Good luck with that,” Timothy F. Slaper, director of economic analysis at the Indiana Business Research Center, said on cutting federal earmarks. “However, this definitely would be stimulative, as this would put more money into the pockets of middle-class Americans and Hoosiers. And it would somewhat level the playing field between [taxpayers] who itemize and those who do not.”
Howard Greninger can be reached at (812) 231-4204 or howard.greninger@trib
star.com.
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Sen. Evan Bayh says federal property tax relief enacted two years ago should be made permanent
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