Indiana local governments could raise food/beverage taxes under House bill

Rep. Bob Cherry, R-Greenfield, had planned to file a bill allowing Hancock County officials to increase the local food and beverage tax, charged when people dine at area restaurants; instead, he said he’ll support a broader bill that would allow any local city or town government across the state to charge its own food and beverage tax and use the money to fund local projects — and ask that counties be covered as well.

Last year, Cherry agreed to pen a bill asking state lawmakers to OK the tax increase for the fairgrounds project estimated to cost about $18 million — $12 million of which local organizers hoped would be generated over 20 years by the tax increase.

Proposals from other communities to fund a variety of projects were lumped into his bill, which didn’t garner the support needed to become law.

This year, Cherry is instead eyeing a bill drafted by Rep. Woody Burton, R-Greenwood, that would give all cities and towns the go-ahead to charge their own local food and beverage tax. Cherry said he’ll ask to amend the bill to make it statewide for all governments.

Currently, diners in central Indiana counties pay a 1 percent food and beverage tax — that’s a penny for every dollar — on top of sales tax. Half of the funding generated is used to finance Lucas Oil Stadium in Indianapolis, and the other half is funneled into county coffers and to pay a variety of county expenses.

Over the years, counties and cities have asked lawmakers to allow them to raise their taxes; some of those proposals were approved, while others failed.

Burton’s bill would give pre-approval to all local governments to charge diners up to 1 percent, without having to return to the Statehouse, he said. Some cities and towns need the extra revenue after struggling in the years following the recession, he said.

And it would leave how that money is used up to local officials.

“We are not going to raise property taxes, but this would be available for them to make decisions for themselves,” Burton said.

Cherry said local government officials want local control, and the bill would give it to them. They could implement their own tax so long as it’s approved by local governing boards after a public hearing, giving residents a chance to oppose the tax increase.

It makes sense to give communities control, he said, rather than depending on individual governments with asking lawmakers for the tax.

The bill has been assigned to the House Ways and Means committee, of which Cherry is the vice chairman.