Lawmakers Signal Possible Return to Property Tax Debate
As cities and counties finish a difficult budgeting year, some Indiana lawmakers say they may reconsider parts of the state’s recent property and income tax changes.
Senate Enrolled Act 1, approved earlier this year, expands deductions for homeowners and agricultural land and makes adjustments to the business personal property tax. The law also includes future changes to local income tax rules that will take effect in 2028 — a shift many local officials warn could significantly reduce their revenue.
State Senator Linda Rogers (R-Granger), a co-author of the law and a member of the Tax and Fiscal Policy Committee, said she is open to revisiting the income tax changes, while maintaining property tax relief. “I would like to see the changes in our LIT or local income tax maybe be extended for another year,” Rogers said. “I think that gives us time to see the real numbers from the Department of Revenue.”
Rogers also said lawmakers may allow local governments to increase property tax collections at a faster rate. Currently, the maximum levy growth is capped at 4 percent, but she suggested it could rise to 6 percent if needed.
In response to the expected revenue drop, local governments have already begun cutting back. South Bend is reducing its Office of Sustainability budget by 70 percent. Goshen has paused plans for a new fire station and a replacement public pool. Mishawaka leaders say the strain will grow in the coming years.
Common Council President Gregg Hixenbaugh called Mishawaka’s 2026 budget “the most challenging one” he has seen. He warned that while property tax relief may be minimal for residents, revenue losses will be severe in 2026 and worsen in 2027 and 2028. The city is projected to face a $15 million deficit by 2028.
State Representative Maureen Bauer (D-South Bend) argued that without changes, “fire departments, police departments, libraries, schools … we will be grossly underfunding them.”
However, Rogers contends that local governments are planning for worst-case scenarios and not accounting for rising assessed values. She said lawmakers and local officials must work together to balance relief with sustainability.
