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The Indiana Legislature’s fiscal policy leaders heavily cut down a bill carrying Gov. Mike Braun’s ambitious property tax plan Tuesday morning.
The 93-page amendment to Senate Bill 1 scrapped an expanded homestead deduction and tax bill caps, which offered the bulk of the plan’s homeowner relief but some said would threaten local government funding.
Instead, lawmakers combined Senate Bills 6, 8 and 9 to create language on referendum reform, a payment deferral program and reform of how the state establishes a cap for on how much a local body can increase its property tax collections. The committee also added demographic-specific relief for seniors, disabled veterans and first-time homeowners.
“We have worked extensively with the governor’s office to get this to a good spot,” committee chair and bill author Sen. Travis Holdman, R-Markle, said during a hearing of the Senate Tax and Fiscal Policy Committee. “We just think there’s a fine line that we have to walk to make sure that we are careful to be responsible to the local units of government and at the same time provide some relief to taxpayers.”
The committee passed the amended bill 10-3 ,with Democrats commending the progress but still advocating for more local protections. The bill now moves to the full Senate floor for amendments.
In a statement Tuesday afternoon, a spokesperson from Gov. Mike Braun’s office said the bill “has taken steps in the right direction,” but is urging for more expansive property tax cuts.
“The governor will carefully review the changes to his plan and looks forward to working with the House and Senate to strengthen the amended bill to include broad based and immediate property tax cuts for Hoosier homeowners who have been hit the hardest by skyrocketing home value inflation,” the statement reads.
Local governments across the state would miss out on $1.2 billion in property tax revenue in 2026 under Braun’s proposed tax cuts, according to the bill’s fiscal note, and that cost was expected to compound each year. Local government leaders testified against the bill last week and warned the tax plan could result in destructive cuts to critical services like police and education.
Under Braun’s plan, a homeowner with an assessed value of more than $125,000 would have seen a 60% homestead deduction, and those with homes valued under that threshold would have seen both the current standard deduction of $48,000 and a 60% deduction of the remaining value. Under the new plan, the deduction would stay at $48,000.
A fiscal note is not yet prepared for the amended bill. Based on the fiscal notes attached to the other bills now being combined, lawmakers estimated the changes would provide several hundred million dollars in taxpayer relief, but not to the scale of the original bill.
Demographic-specific changes
Seniors would see a variety of changes, such as increasing the income limit to $60,000 for a single filer, the assessed value limit to $300,000 and the maximum deduction to $20,000. The bill has parameters to change the assessed value threshold with market fluctuations.
New homeowners making under $75,000 a year could take advantage of a $2,500 credit, which would renew for five years for a total combined credit of $12,500.
The bill also absorbs language that would allow a county to adopt a property tax payment deferral program. A homeowner in the program could put off paying $100 to $500 per year, and up to $10,000 over time. The bill does not specify the time period over which the deferrals can take place.
Changes in calculations, referenda reform
The maximum levy growth quotient currently limits how much local property tax levies can rise in a year based on a six-year rolling average of non-farm personal income growth. Because of inflation, it rose to 5% in 2023 compared to 3.4% in 2019. Lawmakers last year put in an artificial cap of 4%—when, without the cap, the maximum would’ve been 5.5%, according to the Indiana Office of Management and Budget.
The amended bill would freeze it for 2026 and then it could increase 1% in 2027 and 2% in 2028.
Afterward, it would switch to the language first introduced in SB 9, which would change the calculation by adding three additional factors of consideration: personal consumption expenditures, average annual pay in total for all Indiana industries, and U.S. non-farm business labor productivity.
“Those (factors) were selected because we thought they were more representative of the Hoosier economy, and also to flatten the maximum levy growth quotient trend line and provide a more predictable outcome for taxpayers,” SB 9 author Sen. Scott Baldwin, R-Noblesville, said.
And Braun’s push for school referenda reform lives on. The new SB 1 would require a local government or school referendum to take place only during a general election of an even-numbered year. It also would require ballot language to provide upfront language to voters about the levy increase. The bill also institutes a one-year “cooling off” period for capital project referenda, meaning, with some exceptions, schools wouldn’t be able to introduce funding questions in back-to-back years.
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