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Monday, May 25, 2015

Be careful with Local Option Income Tax

Monday, September 17, 2007

To the Editor:

I wish to encourage all interested residents of Putnam County to attend Tuesday evening's county council meeting where they will discuss three new income taxes to be assessed on every Putnam County resident. You have been or will be told that this will reduce your county property taxes that you pay twice yearly, but is this really the case? How much can you expect to save in property taxes versus how much more will you pay in increased county income taxes? These are legitimate questions that I really don't believe anyone can answer with any certainty.

First, these three new county incomes taxes are imposed on everyone, not just wage earners. If you currently file an Indiana income tax return, you pay both state and county income taxes on that return and your county tax could be doubling! Our current county tax rate is 1.5 percent of Indiana Adjusted Gross Income, and the proposal before the council on Tuesday night is to increase this to 3.05 percent. If you are upset with an average 24 percent increase in your property taxes this year, you should be angry at the propects of more than a 100 percent increase in your county income tax.

The council has been told that if they pass these three income tax increases that all property taxpayers in Putnam County will save about 30 percent on their property tax bills annually. To figure out if you are a net gainer or a net loser in this shift of tax payments you'll have to compare how much you'll potentially save on your property tax bill at 30 percent versus how much your income taxes will increase from your most recently filed Indiana tax return when your county income tax doubles. For instance, if your Indiana taxable income on your 2006 income tax return was $60,000 you will pay $930 more county income taxes, but if your current year's property tax bill is $2,000 on your home, you'll just save about $600 in property taxes. I know that no two situations are the same, but I really believe that most residents will see their income taxes increase by more than what they will save in property taxes.

If the average person/family does not save money on the passage of these new income taxes with their offsetting savings in property taxes, who does benefit? Quite frankly, commercial business, industry and large farmers are the winners in this tax shift. The more property taxes you pay, the more likely you are to come out ahead. Businesses, industry and farms already receive very generous savings this year when they opened their property tax bills since the inventory tax was repealed and they no longer pay it. That does help attract and retain industry here in Indiana, but projections by the state were that about five percent of your increaesd property taxes were attributable to the repeal of the inventory tax. Now these same entitites are about to get another windfall with the proposed passage of these three new income taxes.

Additionally, if we hope to attract people to this county to not only work hre, but also reside here, do we want to have one of the highest county incomes taxes in west-central Indiana? Hendricks, Vigo, Tippecanoe and Hamilton counties have already said "no" to these three new income taxes. Owen and Clay counties do not seem to be interested and only Morgan, Parke and Montgomery counties have passed some form of these taxes. While Morgan and

Parke have apparently passed them at the high rates our county is considering, Montgomery County passes their total increase at just .1 percent. Their total county income tax rate will now be 1.1 percent compared to Putnam County's current 1.5 percent and proposed 3.05 percent. in fact, only about a dozen counties out of 92 have passed these new income taxes up until this time, and I think I can see why.

Many of you have heard that in addition to the projected savings at 30 percent, property taxes will be frozen if these three new income taxes are passed. That is partially true, but for just two years and it does not apply to school corporations. Take a look at your property tax bill and you will see that more than 75 percent of the total property taxes you pay go to your local school corporation. Therefore, your property tax bills will probably not decrease by the projected 30 percent. Also, this savings on property tax bills will not be effective until your 2009 property tax billings, but you will start paying the increased income taxes immediately upon passage.

The governor has just recently extended the time in which to adopt these taxes from Oct. 1 to Dec. 31, so this does give the county council more time in which to consider this proposed ordinance. Also, the governor's blue-ribbon commission on local government reform is currently working on proposals due on Governor Daniels' desk by the end of the year. Additionally, the state legislature is meeting on specific ways to reform Indiana's property tax appraisal and assessment system. With increased time to make a decision, and with the opportunity for real property tax reform to possibly come out of the next legislation session, and with so much uncertainty surrounding how these three new income taxes will affect local homeowners and other taxpayers, does it not seem prudent for our county council to slow down this process and possibly wait until next year to decide if we want to impose these taxes on all local residents? Until the state legislature and the governor decide what to do permanently about the property tax mess that has brewed to the boiling point, why should we ask our county council to try to figure out what is the best long-term solution? The answers are not easy or simple, but I believe that the state needs to show the leadership in resolving this property tax problem and and not expect the counties to fix something they did not create. If you believe you want answers to these and many other questons, I urge you to attend Tuesday night's meeting at 6:30 p.m.

Mark Hammer

Greencastle