By MIKE SMITH

AP Political Writer

INDIANAPOLIS (AP) — Gov. Mitch Daniels signed a property tax relief and restructuring bill into law Wednesday during a ceremony in the Statehouse Rotunda that Daniels called a historic event for Indiana taxpayers.

At least 200 people packed the Rotunda and numerous others looked down from the third and fourth floors to watch Daniels sign the bill passed by the General Assembly last Friday.

“We have seen a standard set that I hope Indiana can live up to as we deal with other tough issues in the future,” said Daniels, who was flanked by numerous lawmakers who supported the 662-page bill.

He said the law “inaugurates a new era of taxpayer protection in this state that puts taxpayers first and taxpayer affordability first.”

The law will raise the state sales tax from 6 percent to 7 percent beginning April 1 to help pay for property tax relief. The new revenue this year is projected to lower homeowners’ property taxes by about 30 percent on average statewide in 2008 over last year’s bills.

When fully implemented in 2010, the bill will limit homeowner tax bills in 90 of the state’s 92 counties to 1 percent of their homes’ assessed value unless voters or a special appeals board approve otherwise. Bills for rental property would be limited to 2 percent of assessed value, with 3 percent limits for business property.

Lake and St. Joseph were among a handful of counties that would be hit especially hard by the limits, so as part of a compromise between leaders of the Democrat-controlled House and Republican-ruled Senate, their existing debt would not count against the caps.

The tax-bill limits are projected to save taxpayers about $524 million when fully implemented in 2010, but that is money that schools and local governments would not get that year. But the law makes $120 million available over the next two years to soften the limits’ impacts on schools.

Major school and local government building projects would be subject to referendums, and the state would assume some major local levies next year, including remaining school operating costs and child welfare expenses.

When fully implemented in 2010, the plan would reduce homeowners’ bills by an average of nearly 28 percent statewide that year from 2007 levels.

House Speaker Patrick Bauer, D-South Bend, noted that House Democrats had concerns about the bill’s potential affects on schools and local governments. But he said some provisions had been added to the bill to help mitigate the impact.

He said the law would provide significant property tax cuts, and “any legislation of this significance takes compromise, and sometimes compromise is a little painful.”

Paul Wheeler of Indianapolis, who has been active in denouncing property taxes as unfair, attended the signing ceremony dressed in a 1776 Continental Army uniform he has worn in protests. He said the new law was a “mixed bag.”

He said it would help streamline the assessment process, in part by eliminating most township assessors and transferring their duties to county assessors.

“It also represents a historical blunder,” he said, “because this bill does nothing to remove the annual possibility of every family being evicted for failure to pay into an unfair and broken system.”

Retired mail carrier Tine Martin of Brownsburg said his property tax bills have gone up by about $500 over the past three years. The new law was a start, he said.

“We’re on a fixed income so it affects us maybe a little bit more than the average guy on the streets,” he said. “I think it’s going to be good for the state of Indiana.”

Posted 3/20/2008