A vote on a new income tax that could double the amount now being paid by Putnam County residents is expected to come before the Putnam County Council on Tuesday.
The Local Option Income Tax is being considered by the county council as a way to relieve property taxes while spreading out the tax burden among people who live and work in the county, but do not own land here.
The deadline for adopting the tax had been Oct. 1, but that date has since been extended to Dec. 31.
Indiana has seen protests and outcries statewide from the public after property taxes rose an average of 24 percent from last year's tax assessments. And state legislators, along with the Indiana Association of Counties, are promoting the LOIT as one way to reduce the property tax burden.
However, one Greencastle accountant says he has concerns that the new tax will cost the average homeowner more in overall taxes.
"The vast majority of people who own only their home will save far less in property taxes and incur more in income taxes," Mark Hammer told the BannerGraphic.
The LOIT comes with three options. The first one freezes property taxes for two years for all entities except school corporations. Since school corporations make up at least 75 percent of most property tax bills in the county, it is likely that property tax bills will still increase somewhat during the next two years. This new income tax can be up to .3 percent, or 30 cents per every $100 in earnings.
And, the freeze will be in effect for the 2008 and 2009 property taxes, which will not be collected until 2009 and 2010. However, the new income tax increase will be collected as soon as it is adopted.
The second option allows dollar for dollar property tax relief with up to a one percent cap that can be applied to designated property. That's $1 for every $100 of income.
The third option, the public safety income tax, allows for up to .25 percent (a quarter for each $1 in earnings) if the county also adopts the first and second option.
The Putnam County Council is looking at a total LOIT possibility of 1.55 percent, or $1.55 for every $100 of income.
County income-earners already pay $1.50 per $100 of income for the county's Economic Development Income Tax. Adding LOIT will take the amount paid up to $3.05 per $100 of adjusted gross income.
According to the Association of Indiana Counties, Hendricks County voted not to adopt the new income tax. Montgomery County passed only part two at one-tenth of one percent for homestead properties only. Added to an existing income tax, it takes the Montgomery County tax rate to 1.2 percent.
Hammer points out that if adopted, Putnam County's tax would be one of the highest income rates in the region. And, fewer than 10 of the states 92 counties have adopted LOIT so far.
Another concern, he said, is that income can ebb and flow within a county, depending upon employment and the job market. That makes an income tax an unpredictable source of revenue. However, property taxes do provide a steady cash flow.
The problems with high property taxes at this time, Hammer said, were created by the state.
He said the state is working on a solution for the problem, and state legislators need to be the ones to fix it, not county government.
Anyone wanting to comment on the LOIT as it comes before the Putnam County Council can attend Tuesday's meeting, which begins at 6:30 p.m. in the courthouse annex, located at 209 W. Liberty St., Greencastle. The meeting is open to the public.