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Commission on State Tax and Financing Policy Meeting Summary
Posted in Government

The Commission on State Tax and Financing Policy discussed two important topics at their meeting last week.  They covered the impact commuters have on local option income tax (LOIT) revenue and issues relating to how LOIT is distributed among governmental units.

First, the Commission heard testimony about commuters and the potential impact on LOIT revenue.  When an individual works in one county and resides in another, and both of those counties have imposed a local option income tax, the individual will pay the tax in the county in which the individual resides.  Some counties have a large number of individuals who commute into work across county lines. The concern is that revenue is being generated in one county but taxed in another.  The Commission agreed that there is a need for a comprehensive study regarding where revenue from LOIT is being earned and taxed. The Commission also examined issues relating to the distribution of county and local option income tax revenue to various local governmental units.

Local income taxes were first established in the 1970s and have been amended considerably, making the system difficult to understand.  The current distribution methods are based on the units’ property tax levies, which creates inequities.  A report presented during the meeting illustrated how the number of certified shares received by each type of governmental unit has shifted over the past ten years.  Across the state, counties are receiving fewer shares while cities, towns and special units are receiving a greater number of shares.

An alternative distribution formula was proposed that included distributing a portion of the revenue off the top to the county while the remaining revenue would be distributed to other local units based on levies and population. The Commission plans to hold hearings on October 3, October 12, and October 20, 2011.  Agendas for those meetings have not been released yet.  Additional topics that the Commission is charged with studying include the impact of expanding the historic preservation credit, internet sales and taxation, the impact of eliminating or reducing the personal property tax statewide, and the advantages and disadvantages of phasing out the state inheritance tax. State finances in 2012 and taxation in this new economy will be topics the upcoming Legislative Conference hosted by Bingham Greenebaum Doll on December 15, 2011.  Don’t miss these important discussions at the Bingham Greenebaum Doll Legislative Conference.

  • Of Counsel

    Brenda is a member of the Economic Development Department and concentrates her practice in the areas of government services and public finance law. She regularly works with cities and towns all over Indiana and advises them in a ...

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