When the city council approved the county council’s requests to raise the local income tax and change the way homestead credits are disbursed on Monday, workers and homeowners can expect to see tax increases.
The two taxing units represent more than 85 percent of the population in Montgomery County, which is all that state law requires when making such changes.
The law states each municipality council must also determine if they support the changes the county council has proposed. So, each town board must now address the issue with an up or down vote. Each town council has 30 days from Sept. 21 to have a public hearing on the matter. All municipalities make up what Indiana calls the County Income Tax Council.
County council attorney Rob Reimondo said even though the issue was decided after the Crawfordsville council voted in favor of the changes, each town is still required by law to conduct a public hearing on the issue and vote on the county’s action which is represented by one ordinance and one resolution.
The last word about raising the local income tax will fall into the hands of state officials, who must approve the county ordinance and resolution before it becomes law.
An essential part of the change in the local income tax is that for the first time, the county is going to adopt a Public Safety tax, which is tied to the Local Income Tax.
Any funds collected under the public safety banner must be spent on public safety issues. For example, the Fountain County Council just approved a new .5 percent increase to their local income tax to pay for their new county jail.
The county council’s changes brings the local income tax rate to 2.3 percent from 2.1 percent, of which .6 percent will go to public safety.
Most against the tax raise are leery that the county will increase public safety budgets. There is a concern that the county will just use the new funds for public safety, but at the same time, reduce the public safety general budget items already in play thereby not actually increase the amount paid for public safety.
City councilman Dan Guard expressed those concerns Monday as he cast the only no vote against the ordinance and resolution on both the city and county councils.
Opponents to the change said reducing any part of the general budget already earmarked for public safety would be a concern.
The change in the Homestead credit is a part of the overall picture of the changes. Ten years ago, the county council decided to split available money for property tax relief by having 80 percent of the relief go to homeowners and 20 percent go to businesses. Now, the property tax relief credits will be split 60 percent for homeowners and 40 percent for businesses. The property tax relief credits are funded from the local income tax, or .7 percent of the new rate of 2.3 percent.
How the change will effect each individual property is different depending on where the homeowner lives. For someone living in the county, including the towns, the change will be minimal. A modest home in a town with an assessed value of $90,000 will see about a $30 per year increase in property taxes. Crawfordsville homeowners will experience a higher increase because they have an additional property tax that county property taxpayers do not have.
At a recent council meeting, Montgomery County Council President Terry Hockersmith said the increase will help meet the ever increasing costs of providing government services.
“We did what we had to do, and we did not make a big impact on the average person in the county,” Hockersmith said.
The county council has struggled the last few years to meet county budgets as each department head has had to make significant cuts to their budgets.
In another matter, the county hopes to raise more funds by performing an audit on homes receiving Homestead credits. The county recently entered into an agreement with an accounting firm that will search for properties claiming such credits even though the house is a rental.
State law allows a county to go back three years on such an audit.
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