INDIANAPOLIS – An Indiana House committee heard arguments Monday on whether caps on property tax bills should be placed in the state constitution, and the panel plans to vote on the measure next week.

A Senate committee plans to vote on the legislation Tuesday. If approved by the full Legislature during the session that gets under way in earnest in January, voters would decide whether the caps should be constitutional. Supporters say this would make it more difficult for future legislatures to undo the limits.

Several people who spoke in favor of the legislation before the House Ways and Means Committee on Monday said it would give property owners certainty about their future tax bills. Opponents said the caps already are taking a hit on the revenue streams of local governments, and there should be no rush to make them permanent.

Under a law passed in 2008, property tax bills on homeowners this year were capped at 1.5 percent of their homes' assessed values, with 2.5 percent limits on rental property and 3.5 percent caps on business property. The caps are to be lowered to 1 percent, 2 percent and 3 percent, respectively, in 2010.

The caps are expected to save property owners about $465 million in 2010 and $488 million the next year, but that's money local governments and schools will not get as a result. Counties and a handful of large cities can raise local income taxes to help offset losses due to the caps.

The caps were passed as a result of large increases in property taxes that occurred in 2007 in many parts of the state. The increases were due to a variety of reasons, including spending hikes by local governments and a move to annual assessment changes based on sales price data of property.

Taxpayer Aaron Smith of Lebanon spoke in favor of the constitutional resolution.

"For some folks, permanently capped property taxes are the tipping point keeping them from having to make terrible choices between keeping their homes, life-enhancing medication and nutritious meals," he said.

Kristen Brown of Columbus, who said she was testifying solely as a taxpayer, had no sympathy for local officials concerned about their revenue.

"It is really important that we taxpayers have some sort of degree of financial control over what I believe is excessive spending at the local level," she said.

Some opponents said classes of property should not be treated differently. Others said more time and data about the effects of the caps is needed.

"When we see how fast the world is moving we need to be prudent and keep as many options open as possible rather than confining ourselves to the cement of a constitutional change, said Chuck Little, executive director of the Indiana Urban Schools Association.

Kokomo Mayor Greg Goodnight said his city already has cut 70 employees because of lost revenue due to reductions in property tax money.

"Our constitution should only be changed after proper analysis and debate," he said. "The 1, 2, 3 percent caps have not even gone into effect, therefore we have not even debated the consequences because we haven't seen the impact."

Source: http://news.yahoo.com/s/ap/20091207/ap_on_bi_ge/us_tax_bills_house_indiana_2