The Indiana House approved a sweeping property tax reform bill Thursday, April 17 that aims to lower costs for many homeowners and businesses, while raising concerns about major funding losses for schools and local governments.

Senate Bill 1 passed by a 65-29 vote after a heated debate. The measure would offer a 10% credit on property taxes for primary residences, with savings capped at $300. It also expands tax exemptions for small businesses and raises income limits for senior citizen relief programs.

Proponents said the changes would deliver broad tax relief.

“At the end of the day, what we are doing is we are providing taxpayer relief,” said House Speaker Todd Huston, a Republican from Fishers, according to the Indianapolis Star.

But critics warned the bill could shift costs onto local income taxes, hurting working families. House Minority Leader Phil GiaQuinta, a Democrat from Fort Wayne, called the plan “a bait and switch,” arguing that localities would be forced to raise new taxes to make up lost revenue.

State fiscal estimates project Indiana schools could lose about $744 million in property tax revenue over three years, with urban districts like Carmel-Clay and South Bend hit hardest. Counties including Marion, Hamilton, and Lake also stand to lose hundreds of millions.

Renters are unlikely to see any direct benefit, and may face higher taxes if local governments raise income taxes to offset losses.

Housing policy and urban planning advocacy groups like Strong Towns and Georgist economists such as Joshua Vincent from the Center for the Study of Economics have advocated for an alternative: a split-rate property tax system.

The split-rate property tax shift levies taxes onto land values while reducing the tax rate on buildings and improvements. Proponents argue that such a model would encourage development, reduce sprawl and absentee landlord holdings, and provide relief without shifting burdening renters and workers.

The bill now returns to the Senate for further action and will soon be sent to Governor Braun’s desk for approval.