Capital Comments Purdue Agriculture

It was printed in bold letters on the front of the envelope. “Open Immediately. Property Tax Notice Enclosed.” It was the annual property tax bill on my house! I remembered last year:  a jump in my tax bill of 31 percent. 

I tore open the envelope and found the page of numbers showing how my tax bill was calculated. The taxable assessed value of my home went up only 3 percent this year. Last year the increase was 35 percent. My tax rate went down by almost 5 percent. The tax bill is the assessed value times the rate. If my home value went up 3, but my tax rate went down 5, my tax bill should decrease by about 2 percent, right? 

Wrong. My tax bill went up 10 percent.

Let’s think about the economy in the simplest possible way. People use tools to make goods and services, which other people buy. Gross domestic product is our measure of the value of goods and services. It grew 2.5 percent above inflation in 2023. We can use the simple view of the economy to figure out why GDP grew this much, and what will make it grow in the future. 

Last year Indiana homeowners were hit with property tax bill increases averaging 17 percent, an extraordinary increase. Will it happen again in 2024? Let’s compare 2023 to what we know about 2024 so far, and take a guess.

The memo was posted at the end of December, on the
Indiana Department of Local Government Finance website. It announced the base rate for farmland at $2,280 per acre for property taxes in 2025. That’s up 20 percent from this year’s $1,900. It will be the third straight year of big increases. The base rate rose 16 percent from $1,290 in 2022 to $1,500 for 2023, and 27 percent to $1,900 for 2024. 

What’s the base rate, and why is it going up so much? Economist Larry DeBoer explains.

Consumer price index Inflation ran at 2.1 percent per
year from 1997 to 2019. Then came the pandemic recession and recovery.
Inflation dropped to 1.3 percent in 2020—including 3 months of deflation, when prices were falling—then soared to 8 percent in 2022, the highest inflation rate in 40 years. The peak month was in June that year, when consumer prices averaged 8.9 percent higher than in June of 2021.

Since then inflation has come down a lot. As of November 2023, prices were 3.1 percent higher than a year before. That’s good
news. 

The second installment for 2023 property taxes was due earlier this month. If you’re a homeowner, either you sent a check to your county treasurer or your bank paid the tax out of escrow. Homeowner tax bills were especially painful in 2023. Statewide average homestead tax bills went up 17 percent over 2022, a much bigger increase than in years past. So we wonder, now that 2023 is done, what will happen to tax bills in 2024?