Capital Comments

Scrooge and Malthus Nov 26, 2024

The holiday season is here, and with it a chance to read or watch Charles Dickens’ A Christmas Carol. Listen to learn the strange connection between Ebenezer Scrooge, "surplus population" and British economist Rev. Thomas Malthus. Purdue ag economist, Larry DeBoer, explains.

Policies to Cut Homeowner Property Taxes Oct 23, 2024

Suppose we want to cut property taxes for homeowners. How could we do that? Purdue ag economist, Larry DeBoer, explains.

The Federal Reserve Makes Its Move Sep 25, 2024

Last week the Federal Reserve changed its interest rate policy. What did the Fed do, and why?

Purdue ag economist, Larry DeBoer, explains.

How Do We Know If a Recession Has Started? Aug 29, 2024

How do we know if a recession has started? Sometimes it’s obvious. In March 2020 during the pandemic emergency, weekly applications for unemployment insurance jumped from 200,000 to 6 million. There was no doubt we were in a recession. More often, it’s hard to know if a recession has begun. Ag Economist, Larry Deboer, explains.

Balances Cover Shortfalls in Indiana’s State Budget Jul 24, 2024

Closeout day in the Indiana State House is near and dear to the number crunchers among us. That’s the day the State Comptroller and the State Budget Agency tell us about revenues, expenditures and balances for the just-ended fiscal year.

Fifty Years of Indiana Property Tax Policy Jun 26, 2024

Ag economist, Larry DeBoer, breaks down the ups and down of Indiana's property tax policy.

What Will Happen When the Social Security Trust Fund Runs Out? May 23, 2024

Purdue agricultural economist, Larry DeBoer, posits what could happen to Social Security in this episode of Capital Comments.

The Envelope from the County Treasurer Apr 24, 2024

It was printed in bold letters on the front of the envelope. “Open Immediately. Property Tax Notice Enclosed.” It was the annual property tax bill on my house! I remembered last year: a jump in my tax bill of 31 percent.

I tore open the envelope and found the page of numbers showing how my tax bill was calculated. The taxable assessed value of my home went up only 3 percent this year. Last year the increase was 35 percent. My tax rate went down by almost 5 percent. The tax bill is the assessed value times the rate. If my home value went up 3, but my tax rate went down 5, my tax bill should decrease by about 2 percent, right? Wrong. My tax bill went up 10 percent.

A Simple View of the Economy Helps Us Understand Growth Mar 21, 2024

Let’s think about the economy in the simplest possible way. People use tools to make goods and services, which other people buy. Gross domestic product is our measure of the value of goods and services. It grew 2.5 percent above inflation in 2023. We can use the simple view of the economy to figure out why GDP grew this much, and what will make it grow in the future.

How Much Will Homeowner Property Tax Bills Rise in 2024? Feb 22, 2024

Last year Indiana homeowners were hit with property tax bill increases averaging 17 percent, an extraordinary increase. Will it happen again in 2024? Let’s compare 2023 to what we know about 2024 so far, and take a guess.

Farmland Property Taxes May Keep Increasing Jan 24, 2024

The memo was posted at the end of December, on the Indiana Department of Local Government Finance website. It announced the base rate for farmland at $2,280 per acre for property taxes in 2025. That’s up 20 percent from this year’s $1,900. It will be the third straight year of big increases. The base rate rose 16 percent from $1,290 in 2022 to $1,500 for 2023, and 27 percent to $1,900 for 2024. What’s the base rate, and why is it going up so much? Economist Larry DeBoer explains.

Taking Inflation Apart Dec 18, 2023

Consumer price index Inflation ran at 2.1 percent per year from 1997 to 2019. Then came the pandemic recession and recovery. Inflation dropped to 1.3 percent in 2020—including 3 months of deflation, when prices were falling—then soared to 8 percent in 2022, the highest inflation rate in 40 years. The peak month was in June that year, when consumer prices averaged 8.9 percent higher than in June of 2021.

Since then inflation has come down a lot. As of November 2023, prices were 3.1 percent higher than a year before. That’s good news.

How Much Will Homeowner Property Taxes Rise in 2024? Nov 20, 2023

The second installment for 2023 property taxes was due earlier this month. If you’re a homeowner, either you sent a check to your county treasurer or your bank paid the tax out of escrow. Homeowner tax bills were especially painful in 2023. Statewide average homestead tax bills went up 17 percent over 2022, a much bigger increase than in years past. So we wonder, now that 2023 is done, what will happen to tax bills in 2024?

How Can a Homeowner Calculate the Cost of a School Referendum? Oct 25, 2023

Election Day is coming up, and 12 Indiana school districts have put property tax referendums on the ballot. Voters who own homes will want to know, “How much will I pay if the referendum passes?”

Here’s how to make a good guess.

How Do States Manage Without Individual Income Taxes? Sep 20, 2023

Indiana has an individual income tax to help pay for state services. Indiana raises about $8 billion a year from its state income tax, which is 36% of total general fund revenues. Most states have income taxes, but eight states do not. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington (state) and Wyoming do not collect individual income taxes to fund their state governments. How do they get by? What do they do instead?

Supply Chain Pressure is Easing, and so is Inflation Aug 23, 2023

Inflation is falling, and we’re not in recession. How can that be? Economist, Larry Deboer, provides insight.

Indiana State Balances and the Pension Stabilization Fund Jul 26, 2023

The Indiana fiscal new year is upon us, having begun on July 1. The big New Year’s celebration happened on July 13, with the “closeout” announcement. That’s the state’s accounting of revenues, spending and balances as of the end of fiscal 2023. The good news: Indiana has $2.9 billion in the bank, 13.6 percent of the general fund budget. That’s enough to cover cash flow and most shortfalls in revenue below expectations.

That amount takes some explaining though, because a year ago balances were $6.1 billion. Where did that money go?

Larry Deboer explains.

Will the Inflation Rate Keep Falling? Jun 26, 2023

Inflation is coming down. The Bureau of Labor Statistics, which measures the Consumer Price Index reported the 12-month inflation rate for May at 4.0 percent, down a whole point from the 5.0 percent rate in April. Inflation had peaked in June 2022 at 8.9 percent, which was the highest inflation rate in 40 years. Larry Deboer gives his analysis of what it all means.

The General Assembly Delivers Some Property Tax Relief May 23, 2023

Indiana homeowner tax bills increased 17 percent on average this year, the largest increase in years. Other property owners saw big increases too. The pandemic caused property values to rise in 2021, which increased property assessments in 2022. Tax bills in 2023 were based on those assessments. Purdue Extension ag economist, Larry Deboer, breaks it all down.

An Extra Billion and a Half in State Revenue Apr 27, 2023

On April 19, 2023, in the Indiana Statehouse in the city of Indianapolis, one-point-five billion dollars appeared out of thin air. The state revenue forecast upped its prediction of revenues for the rest of this fiscal year and the coming biennium, 2023-25, by $1.5 billion over the prediction from last December.

What happened? Larry Deboer explains.

Property Tax Bills are Increasing a Lot in 2023 Mar 22, 2023

Indiana county treasurers soon will mail property tax bills to owners of homes, rental housing, farmland, and businesses. Most will see big increases in the assessed value of their property. This will mean big increases in tax payments.

The increase is a legacy of the pandemic. Property values rose a lot in 2021. Home prices increased as mortgage interest rates fell and people demanded more space to work at home. Farmland prices increased because corn and soybean prices spiked, making land ownership more profitable. Construction costs increased due to shortages of building materials.

Solar Energy Projects and Property Taxes Feb 21, 2023

Utilities are building a lot of solar energy projects in Indiana. Fields of solar panels will become a common part of our landscape. This may help avert some consequences of climate change on the planet. But what are the local consequences?

Farmland Property Tax Misery Has Company Jan 25, 2023

Farmland assessments for property taxes are going up. So are home, rental housing and business assessments. Property tax misery has a lot of company.

Farmland assessments start with a base rate per acre. The base rate is a statewide number calculated each year by the Department of Local Government Finance.

State Revenue Growth Will Return to Normal Dec 21, 2022

Thursday, December 15, was a much-anticipated day at the Indiana Statehouse. It was Revenue Forecast Day, when the General Assembly heard the prediction of how much revenue will be available for state spending during fiscal years 2024 and 2025. The legislature will pass a two-year budget, in the session starting in January, based on these revenue estimates.

Holiday Inflation Cheer Nov 29, 2022

The holidays are here. Time for good cheer and happy thoughts, even if candy canes and sugar plums cost 7.8 percent more this year than last.

That’s the 12-month inflation rate as of October 2022. The Consumer Price Index for all items shows prices 7.8 percent higher than in October 2021. This year has seen the highest inflation since the early 1980s.

How did that happen?

Cost of Living Adjustments Oct 24, 2022

COLA stands for cost of living adjustment, and both the Social Security Administration and the Internal Revenue Service have just announced big COLAs for next year. COLAs are nothing new. They’ve been happening for decades. But inflation has been so low for so long that we hardly noticed them. Now inflation is the highest it’s been in 40 years, and COLAs are in the news.

The Housing Market is Cooling Off Sep 22, 2022

The Federal Reserve is serious about battling inflation. They’ve raised their policy interest rate from near zero in February to an average of 2.33 percent in August. Earlier this week they raised it three-quarters of a point. It hasn’t been above 3 percent since early 2008.

The idea is to get people to borrow less, so they’ll spend less, so businesses have less reason to raise prices. Not much has happened to inflation yet – except in the housing market. That’s no surprise. Most houses are bought with mortgages, so if borrowing is more expensive, fewer people will buy houses.

Is this a Recession? Aug 25, 2022

Is this a recession? Real gross domestic product has dropped for two straight quarters. Real GDP is our measure of goods and services produced, adjusted for inflation, and the United States is producing less now than it was at the end of 2021. Usually that’s exactly what we mean by a recession.

$6 Billion in Balances Jul 21, 2022

Mid-July is number-cruncher nirvana if you follow the Indiana state budget. That’s when the State Budget Agency releases its closeout for the previous fiscal year. This year the glorious day fell on Friday, July 15, and we learned one astounding fact: At the end of June, the end of fiscal year 2022, Indiana balances were $6.1 billion. Our state has six billion dollars in the bank.

Inflation and Indiana School District Budgets Jun 21, 2022

The inflation rate in May was 8.6 percent, the highest since the bad old days of the Great Inflation 40 years ago. We’re all paying higher prices. So are our school districts.

School districts face some costs that increase as prices rise, and other costs that don’t. Food, fuel and equipment prices rise, and schools must pay. But teacher salaries are set in contracts, and until those contracts expire, inflation won’t have an effect.

In 2021, Indiana public schools paid 62,000 teachers $4.4 billion in salaries and benefits. That’s more than one-third of total school budgets. Teacher contracts run for one or two years, and until they expire, pay will rise at rates set before inflation increased. After a year or two contracts will be renegotiated, and it’s likely that teachers will expect their pay to keep up with higher inflation.

Shocked and Not Shocked by Home Assessments May 24, 2022

Have you received your Form 11 from your Indiana county assessor? Purdue Economist Larry Deboer has. He was both shocked and not shocked by his new assessment. In this month's episode, Larry walks us through potential impacts of property assessments.

How to Read an Indiana School Referendum Question Apr 19, 2022

Election Day is coming up – on Tuesday, May 3 – and school referendums will be on the ballot in nine school districts. It’s best if voters investigate the referendum issues in advance, so they know whether to vote yes or no. What if you didn’t do your homework and want to do the benefit-cost comparison on the fly, in the voting booth? Larry Deboer has advice just for you.

The Residential Share of Property Taxes is on the Rise Mar 30, 2022

Here’s one way to think about property taxes: The local government sets its budget, subtracts all other tax revenue, and raises the remainder with the property tax levy. The assessor measures the value of all the parcels of taxable property inside the boundaries of the government. Then the government measures the share of each parcel in total assessed value. That is the share of the levy that the owners must pay.

In other words, your property’s share in the total value of property is your share of the property tax levy. We use property value shares to divvy up responsibility for funding local government.

What Will Happen to Inflation? Feb 22, 2022

The inflation rate was 7.5 percent from January 2021 to January 2022, the highest inflation in 40 years. It arrived suddenly and unexpectedly. A year ago the inflation rate was 1.4 percent, which was lower than the 1.7 percent average rate over the previous decade.

It’s an unwelcome throwback to the Great Inflation of the 1970s. What happened, and when will it go away?

Farmland Assessments will Increase for Taxes in 2023 Jan 28, 2022

Farmland property taxes have been falling. Total property taxes paid by agricultural property owners fell 2.3 percent per year from 2017 to 2021, mostly because of lower farmland assessed values.

But farmland prices are rising. A Purdue Agricultural Economics survey showed that average farmland selling prices increased 12.5% from 2020 to 2021. Eventually, farmland assessed values will rise too.

What Happens to Property Taxes During Inflation? Jan 04, 2022

The property tax is the biggest source of tax revenue for most Indiana local governments, and they were worried about the effect of the COVID recession on property tax revenues.

But rising home values in 2020 will increase assessed values for tax bills in 2022.

We Finally Know How the Recession Will Affect Property Taxes Nov 29, 2021

What will be the effect of the COVID recession on the property taxes that fund Indiana local governments? I’ve been thinking and writing about the possibilities for a year and a half. Now we have enough data to answer that question. No spoilers, though. Let’s consider what could happen—and what did happen after the Great Recession in 2007-09.

The Great Recession depressed new construction and reduced the demand for property. Property prices fell, especially for homes. Statewide, assessed values fell in 2011 and again in 2013. Assessments declined in 54 of 92 counties in 2013 alone.

The COVID recession was in 2020. Changes in property values were assessed in 2021, for tax bills in 2022. The recession of 2020 would hit local government budgets in 2022.

Birth Rates Have Been Falling for a Long Time Oct 20, 2021

Americans are having fewer children. Reports this past summer showed that the fertility rate dropped in 2020, to 56 births per 1,000 women age 15 to 44. Only 5.6 percent of women in their child-bearing years had babies. Early indications for 2021 showed a further decline.

Fertility has been dropping for more than a decade. Fertility rates peaked in 2007 at 69 per 1,000 women age 15 to 44. The rate had been rising in the decade before that.

Let’s take a longer view. Much longer.

What Three Forecasts Say About Our Economic Future Sep 22, 2021

Where is our economy going? Let’s ask some folks whose job it is to forecast the future of the U.S. economy. How about looking at three forecasts – one from government economists, one from academic economists, and one from business economists.

Last Year’s Recession Hits Indiana Local Governments Next Year Aug 19, 2021

The recession may be over for the U.S. economy, but for Indiana local governments the recession is just about to start. That’s because the property tax and the local income tax respond to economic changes with a two-year delay. What happened to the economy in 2020 happens to local tax revenues in 2022.

Reasons to Celebrate the Indiana Fiscal New Year Jul 22, 2021

Indiana's fiscal new year began on July 1, and there are reasons to celebrate. Listen to Dr. Larry Deboer explain why.

What Kind of Inflation Problem Do We Have? Jun 24, 2021

We’ve got an inflation problem. What should we do about it? That depends on what kind of inflation problem we’ve got.

In May the consumer price index was 4.9% higher than it was 12 months before. The last time we saw an inflation rate that high was July 2008. The last time it was that high, and it was more than just rising gasoline prices, was October 1990. It’s the highest inflation rate in almost 31 years.

Inflation has increased these past three months, March through May. Partly that’s because the 12-month rate compares to March through May 2020, when prices were falling. That means the 12-month inflation rate would register high even if prices were just getting back to normal.

It’s more than that.

A State Revenue Forecast for the Ages May 19, 2021

Might things be looking up? Dr. Larry Deboer takes a closer look at Indiana state revenue forecasts.

Pent-Up Demand, Then and Now Apr 21, 2021

What will happen with all the pent up demand for goods and services once the pandemic has passed? Dr. Larry Deboer has some thoughts...and a history lesson.

It’s Tax Season. Where Do Your Local Taxes Go? Mar 18, 2021

Tax season is coming up. Federal income taxes are due on April 15, back to the normal date after last year’s delay. That’s the due date for Indiana’s state and local income taxes, too. The first installment of the property tax is due on May 10. You pay your motor vehicle excise tax with your vehicle registration each year. The due dates are based alphabetically; my last name gives me an April 7 due date. And, of course, sales taxes and motor fuel taxes know no season. You pay those when you shop or fill your tank, all year long.

The debates about federal spending and the state budget are in the news, so we have some idea of where those taxes go. But what about local governments? Property taxes, income taxes, sales taxes, motor fuel taxes and vehicle excise taxes all fund local government, too. Here’s how.

Okun, Phillips and Our Economy Feb 17, 2021

If you want to be remembered in economics, get yourself a curve. There’s the Lorenz curve, the Laffer curve, the Kuznets curve, and, probably most famous, the Phillips curve. Phillips was A.W. Phillips, an economist from New Zealand who worked in London. In 1958 he drew a curve connecting the dots between inflation and unemployment. When unemployment went down, inflation went up. The Phillips Curve took the economics profession by storm.

The Recession May Be a Light Hit for LIT Jan 20, 2021

The December state revenue forecast for Indiana projected that individual income tax revenue would be about $6 billion this year. But Indiana uses local income taxes too, and we know that the income tax revenues that local governments receive in 2021 will be just over $3 billion.

The State Revenue Forecast: We Might be OK Dec 17, 2020

Can it be, is it possible, that 2021 won’t be terrible? The state revenue forecast was released on December 16 to provide a starting point for the Indiana General Assembly to craft a new state budget. Might the coming biennium be OK?

It didn’t look OK last June. State revenues suffered an extraordinary drop in the last quarter of fiscal 2020, down $1.4 billion, 27 percent less than expected. We covered the loss by restricting agency spending and drawing down balances. What had been $2.3 billion in the bank was suddenly $1.4 billion. It wouldn’t last long at that rate, and then much bigger budget cuts would be needed.

A Tale of Two Recessions Nov 19, 2020

How does the Great Recession of 2007-2008 compare to the COVID Recession of 2020? Larry Deboer, ag economist at Purdue University, explains.

COVID Recession Makes Farmland Tax Predictions Harder Oct 22, 2020

Though some predictions are harder than others, we are confident about this one: Property tax bills for farmland owners will go down next year.

We can predict this because we know the base rate for farmland for tax bills in 2021. The base rate is the starting point for the assessment of farmland. The state’s Department of Local Government Finance applied its formula to six years of data on corn and soybean prices, land rents, interest rates and costs, and came up with $1,280 per acre. That’s 18 percent less than this year’s base rate of $1,560. This value is adjusted for soil productivity and other factors to come up with the assessed value for each acre.

Don’t get spun: What’s happening in our economy, right now? Sep 16, 2020

Forecasts? Don’t talk about forecasts. You kidding me? I just want to know what’s happening now!

With apologies to Jim Mora, that’s our problem. What’s happening in our economy, right now?

Rents, Telecommuting and Harry Potter Aug 20, 2020

Believe it or not, these three things get tied together as Purdue Extension specialist, Larry Deboer, explains. Spoiler alert, the pandemic is part of the story.

Trouble for Indiana’s State Budget Jul 23, 2020

We got trouble, my friends, "with a capital T." The Indiana state budget closeout for fiscal 2020 was held in mid-July, so we have a good idea of how bad things are.

Now that we know the numbers, we can take a look ahead. Let’s do some “supposing” about what could happen during this fiscal year 2021, and during the next biennium.

Recession and the Indiana Property Tax Jun 24, 2020