Capital Comments

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

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 reven...

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.

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.

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.

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...

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 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.

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.

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?

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 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 ha...

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.

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.

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 expi...

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. 

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. 

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...

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 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.

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.

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 redu...

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...

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.

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.