One afterthought by many: If the entire property tax bill will/is to be deducted on the Federal forms, but then, will the follow-up rebate, be taxable as other income?
You can bet that's going to become a big issue. Unless a taxpayer uses an accountant or professional tax preparer, most homeowners will simply deduct the amount billed to them and never give a second thought to reporting the rebate. The problem for persons who escrow their property taxes with their mortgage company could be alleviated if the rebate checks were sent directly to the mortgage company and the homeowner's escrow account was credited. Then the statement the taxpayer used for tax purposes would reflect the offset from the rebate. But that's probably not going to happen in most cases because you can bet the counties will be inclined to mail the checks directly to the homeowners. If widespread under-reporting is suspected because of the rebate, that might trigger a lot of IRS audits.
Brian Howey is also reporting that some county officials are very unhappy with the tax rebate plan adopted by the legislature. He writes today:
The short-term property tax reforms are just now starting to sink in around the state, and the early returns are not positive. County clerks from Fayette and Union counties are "livid" at the property tax rebate in the in the 2007 biennial budget bill that gave property owners $550 million in tax relief to offset average property tax increases of 24 percent.
House Democrats decided on the rebates in lieu of a plan by State Sen. Luke Kenley that would have shifted 60 percent of property taxes to the state, which would have funded school operations and juvenile detention. House Speaker B. Patrick Bauer called that plan too complex. The rebate was the brainchild of Bauer.
"This doesn't seem like a real efficient way to get property tax relief," Fayette County Treasurer Debbie Shaw Kidd said in the Richmond Palladium-Item. "I wish (legislators) would think how this would affect the counties. It would make more sense to allow us to apply it as a credit in the fall."
Union County Treasurer Bonnie Adams described herself as "livid" when she learned about the rebate. "Taxpayers have to come up with the money upfront," Adams said. "It will drive up their mortgage escrows. Who do we send the check to -- the homeowner or the mortgage company? All (the legislature) did was make themselves look good. They had ample time to do something and they didn't do
anything until the midnight hour."
In the same Palladium-Item story, Republican State Rep. Tom Saunders called the tax rebates "asinine," and said it could cost $15 to $20 a check" to produce and send.
Steve Johnson of the Indiana Fiscal Policy Institute said that in some cases, rebate checks could be as little as "$5." Johnson said on Monday's WXNT Abdul in the Morning Show, "I'm really waiting to see the state send out a check for less than $5. I'm waiting for people to say how much did the state spend to send me this check."