IMA President/CEO Andrew Berger's Letter to the Editor: Inflation Hits Business Assessments

Indiana businesses are experiencing what many homeowners have seen in recent years: dramatic jumps in the assessed values (AV) of their real property. In 2026, the statewide assessed value of all types of property is going up 9.7% compared to 2025. Residential property, which is just over half of the assessed value in Indiana, increased 7.3%. For business property, the increases were more dramatic. Commercial property is up 15.0%. Industrial property values, of most concern to the IMA, are up 25.8%.

These increases in business property assessed values, which represent the biggest one-year jump in years, happened due to two primary factors.

First, manufacturing is growing. Factories are expanding and big projects are taking place in Indiana. This growth and the reclassification of ground from agricultural property to commercial/industrial adds to the overall assessment number. And in some counties, huge increases in industrial AV are clearly tied to big projects like data centers.

Secondly, inflation has hit the assessment system. The state updated the data used by counties to measure the cost of construction, which is the basis for industrial assessments. It had been four years since the last update, and during that period the cost of labor and materials increased substantially. The state also adjusted the way it measures costs in Indiana compared to other states, contributing further to increased values.

Assessments are just the start of the process to determine how much a property taxpayer owes. Local governments and schools determine the spending and associated tax rates that are placed on local property owners. And homeowners and businesses alike are eligible for significant tax benefits that change the overall tax liability.

State leaders have repeatedly sought to address the problem of increasing homeowner assessed values and the corresponding property tax increases. The latest effort passed in 2025 and made significant cuts for homeowners, most of which are spread out over the next couple of years. There were also tax breaks for agricultural land and business equipment. The changes to the assessment of business equipment allow greater depreciation for older equipment; and like the changes to homeowner taxes, the equipment changes also phase in over the coming years.

Of the over $1.5 billion in property tax cuts for 2026-28 that were the result of the 2025 legislation, more than 80% will go to homeowners. For business taxpayers, the property tax cuts for homeowners will be offset in part by shifting the tax burden to business. As homeowners pay less and local units keep taxes the same, other property taxpayers must pick up the difference.

This experience from 2025 shows how further cuts to homeowners can shift the property tax burden to business taxpayers. The fact that there is such high growth in business AV means there is even greater risk of additional property tax increases for Indiana’s employers. Simply put, rising AVs for businesses, plus added cuts to homeowners (both those already passed in 2025 and any that may be debated in the upcoming legislative session), could result in big property tax increases for Indiana businesses, particularly industrial property owners like manufacturers.

Manufacturers and other businesses have dealt with the rising cost of labor, parts, raw materials, transportation, insurance, and most other business costs in recent years. Now inflation is hitting business property assessments hard and a further shift of the property tax burden to businesses could follow. Indiana leaders must be mindful of the economic impact to the state that may occur by further shifting the tax burden to the business community.