FORT WAYNE, Ind. (WOWO): State Rep. J.D. Prescott is continuing a statewide listening tour to gather feedback on a proposal that would eliminate Indiana’s property tax system and replace it with a broader sales tax on services.

Prescott joined WOWO’s Kayla Blakeslee to discuss the proposal, which would expand Indiana’s current 7% sales tax to cover certain services and labor costs that are not currently taxed.

Under the plan, services such as haircuts, auto repair labor, and landscaping could become subject to the sales tax.

“Right now, if you go and get your hair cut or hair services, that’s a 0% service tax. We’d charge 7% sales tax on that,” Prescott said. He also used an oil change as an example, explaining that customers currently pay sales tax on parts like oil and filters, but not on the labor.

Prescott said the goal is to shift Indiana toward a consumption-based tax system, where revenue would come from more people using services, including visitors from outside the state.

One of the biggest changes would involve construction costs. Prescott said a $300,000 home could see an additional $10,500 in upfront taxes if roughly half of the cost comes from labor that would become taxable under the proposal.

He compared that cost with ongoing property tax payments, saying some homeowners could save money over time by eliminating annual property tax bills.

Prescott said the average Hoosier pays about $1,800 per year in property taxes. Under his proposal, he estimated a household would need to spend about $14,300 in taxable services for every $1,000 they currently pay in property taxes to match that tax burden.

“There could be some years where you pay more with this system,” Prescott said. “I think there’s going to be a lot of years where most families would pay less with this system, but you do have to look at your own individual tax circumstances.”

The proposal has raised questions from business owners, farmers, schools, and local governments that rely heavily on property tax revenue.

Prescott said businesses that provide taxable services would be responsible for collecting and remitting the sales tax, similar to how businesses already handle sales tax on goods.

He also outlined how revenue would be distributed to replace property tax funding. Prescott said 10% of the revenue would go into a reserve account, with the remaining funds divided among schools, counties, cities, and other local entities.

Under his proposed formula:

• 45% would go toward schools for operations and debt services.
• 20% would go to counties based on population and roadway miles.
• 20% would go to cities using a similar formula.
• Additional funding would support township government, fire districts, and existing TIF district obligations.

Prescott acknowledged the proposal still faces challenges, including questions about implementation and the impact on agriculture and businesses.

He said the purpose of his listening tour is to identify those issues before bringing the legislation back to lawmakers.

“I want to know what holes are in this problem, how to develop an idea to fix it,” Prescott said. “I’d rather know now before January.”

Prescott said he hopes to continue building support for the proposal ahead of the next legislative session, while using feedback from Hoosiers to refine the plan.

Information about upcoming stops on his listening tour is being shared through his campaign’s Facebook page and the website repealpropertytax.com.