How High Are Indiana Property Taxes, Anyway?

Niki Kelly's meandering piece on property tax reform in Sunday's Fort Wayne Journal Gazette brings up an interesting question: just how high are Indiana property taxes, anyway?

Kelly cites three statistics, and doesn't really try to sort out which ones make the most (or the least) sense:

According to U.S. Census Bureau data for fiscal year 2004, Indiana ranked 26th in terms of property tax collections per capita. This statistic includes all property taxes collected from homeowners, businesses and farmers.
According to 2005 statistics from the Tax Foundation in Washington, Indiana is 34th in median property taxes paid on owner-occupied homes, at $1,079 annually.
“On the other hand there are national studies that show our proportion share of property taxes relative to the total tax paid in Indiana is out of balance relative to the nation,” said Rep. Jeff Espich, R-Uniondale.
A recent brief by the Indiana Fiscal Policy Institute shows that property taxes account for about 31.2 percent of all state and local tax revenue – a percentage that Espich says is higher than that of other states.

So which number means the most here? Let's focus here on the Census data.

The Census data takes all the property taxes paid by anyone in each state-- including homeowners, small businesses, big manufacturers, and vacation homeowners who live in other states-- adds them together, and figures out a "per capita" tax amount. In other words, if you divvied up the state's total property tax haul evenly between every state resident, from the youngest baby to the oldest senior, this statistic is what you get.
As used in this article, the Census data has two strikes against it. It doesn't tell us anything about how high residential property taxes in particular are, and it expresses these taxes on a per capita basis. Kelly tells us that Indiana prop taxes are 26th highest on a per capita basis. As it turns out (although she doesn't tell us), that puts Indiana below the national average, with a per capita of $974 compared to a national average of $1,086. But this is to be expected, given that Indianans have less income per-person than the national average. In general, the higher per-capita income in a state, the higher state and local taxes are. So citing this stat doesn't tell us anything meaningful about whether Indiana property taxes are high are low.

This doesn't mean the Census data is worthless-- it just means that the Census data shouldn't be expressed on a per capita basis. A better measure is expressing taxes as a share of personal income, because that gives a good sense of how taxes compare to a state's collective ability to pay them.

As it turns out, (see ITEP's web-based Powerpoint slide here) Indiana property taxes are slightly below average as a share of personal income, too. So as it happens, the per-capita data tells a story that is basically accurate.

We can leave for another day the question of how useful the other statistics cited in Kelly's article are. In fact, none of these stats tell us what we really want to know, which is how Indiana property taxes affect families at different income levels. For that, you have to rely on ITEP's Who Pays report.