Biggest bills of 2025 — property tax reform and state budget — will have ripple effects for years

The two top priority bills this legislative session will have huge impacts on the financial futures of state and local governments, and many Indiana residents.

The new state budget and the property tax reform debate helped define the General Assembly’s 2025 session.

The property tax debate began months earlier, during the 2024 election campaign. Homeowners’ property tax bills had spiked sharply over the last three years, driving calls for relief up and down the ballot.

For new Gov. Mike Braun, it was priority one.

“Hoosiers sent me here with a clear directive that this cannot be ignored,” Braun said.

Braun’s plan would have reset homeowners’ property tax bills to 2021 levels and capped future increases.

The problem? Property taxes only fund local governments, schools and libraries. And Braun’s plan would’ve cost locals up to $1.6 billion a year.

Owen County Councilman Anton Neff was one of many local officials who told lawmakers such cuts would be devastating.

“With the magnitude of cuts that this will lead to, there’s no way to avoid cuts in public safety,” Neff said. “It’s one thing to want to say to taxpayers that you cut their taxes, it’s another when you have to be honest with them about cutting their services, as well.”

Lawmakers’ initial versions of the property tax bill focused on targeted relief for older Hoosiers and veterans.

But a vocal contingent of citizens — led by conservative radio talk show hosts and Lt. Gov. Micah Beckwith — pushed Braun’s plan, including at a sizable rally at the Statehouse.

“Think about the moral issue of property taxes,” Beckwith said. “Is it really your property if you have to pay the government rent to stay there? No! This is a fundamental question to our liberties.”

Lawmakers would never go as far as Braun’s plan. But the final version ensures two-thirds of homeowners have lower bills in 2026 than in 2025 and gives local governments more tools to increase local income taxes as a way to make up revenue losses.

House Speaker Todd Huston (R-Fishers) said it strikes the right balance.

“For our role in this, which is to create a better property tax system, more transparent to Hoosiers, provide more relief to Hoosiers, I think we hit a home run,” Huston said.

But Democrats, like House Minority Leader Phil GiaQuinta (D-Fort Wayne), said it’s a scam that puts pressure on local governments.

“This bill isn’t a tax relief bill, it’s a tax hike bill,” GiaQuinta said.

If the challenge in the property tax debate was finding the right balance, the challenge in the new state budget was trying to do more with less.

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For the first time in over a decade, an initial state tax revenue forecast in December didn’t give lawmakers much new money to spend.

And halfway through session, Huston called it the toughest budget he’d seen in his 12-plus years in the Statehouse.

“You know, we’re going to be cautious because there’s a lot of uncertainties right now,” Huston said. “We’ll get a new revenue forecast in April that maybe will have a little better idea of what those uncertainties are, particularly at the federal and national and international level.”

The governor’s proposed budget, as well as the House and Senate versions, had a lot of similarities: 5 percent cuts for most state agencies, slight spending boosts for K-12 education and huge reductions in funding for local public and mental health programs.

Then came that April revenue forecast.

“Today’s forecast does represent a net decrease of nearly $2.4 billion — with a B — billion dollars in projected tax revenue,” saidHouse Republican fiscal analyst Ben Tooley.

That projected revenue decrease from the previous forecast is the largest since at least the Great Recession.

And it had legislative leaders all singing the same tune.

“All things are on the table for discussion,” said House Ways and Means Chair Rep. Jeff Thompson (R-Lizton), echoed almost verbatim by Senate Appropriations Chair Sen. Ryan Mishler (R-Mishawaka), Senate President Pro Tem Rodric Bray (R-Martinsville) and Huston.

The final plan to make up the $2 billion shortfall included raising the cigarette tax, cutting public health and higher education funding, and spending down budget reserves.

Bray said crafting this year’s budget was one of the most challenging things lawmakers have ever done.

“It obviously creates some pretty difficult hills to climb,” Bray said. “But Indiana, fiscally, is in a fantastic place and able to rebound from a challenge like this — and we are grateful for that.”

But between allowing the wealthiest Hoosiers to access private school vouchers and slashing public health spending by more than 70 percent from the current year, Sen. Andrea Hunley (D-Indianapolis) said the budget falls short.

“We know that everyone’s got to make sacrifices this session but again, is it going to be on the back of the Hoosiers that need the support the most?” Hunley said.

Ultimately, some will feel the effects of this session in the coming weeks and months — while for other Hoosiers, the impacts may not be truly understood for years to come.

Brandon is our Statehouse bureau chief. Contact him at [email protected] or follow him on Twitter at @brandonjsmith5.