Cities and towns might gain local income tax clout

BY PATRICK GUINANE, Times of Northwest Indiana
pguinane@nwitimes.com

INDIANAPOLIS | Indiana House Democrats are considering giving cash-strapped cities and towns new power to band together to force county income taxes, an concept that could loom large in Lake County.

House Speaker Pat Bauer, D-South Bend, revealed the latest wrinkle to months-long property tax relief talks during a meeting Thursday with reporters.

Bauer said lawmakers must devise some way to protect police and fire budgets from local government spending cuts that would be forced by property tax caps sought by Gov. Mitch Daniels. County-option income taxes remain the most pliable legislative option, though Bauer acknowledged "the cities are afraid the counties won't do it."

The Lake County Council approved a 1 percent income tax for property tax relief twice last year but could not override a veto from county commissioners. Bauer's suggestion, which has yet to latch onto pending legislation, might lend East Chicago, Gary and Hammond enough clout to force a countywide income tax.

The three northern cities face drastic budget cuts next year -- more than $100 million combined -- if lawmakers move ahead with Daniels' plan to limit tax bills to 1 percent of assessed value for owner-occupied homes, 2 percent for rental properties and 3 percent for businesses. The so-called circuit breaker would provide relief by restricting the property tax revenue that flows to local government and schools, with Lake County expected to lose about $252 million next year.

Hammond Fire Chief Dave Hamm warned that his department's "response time will worsen, and there will be deaths" if the city is forced to endure a projected $21 million in spending cuts next year. His statement was among the most alarming predictions local government leaders offered during a series of House committee hearings this week.

"We can't ignore what they're saying," Bauer said. "But we must go ahead and cut property taxes but (also) find maybe the replacement (funding) methods to keep public safety in the state of Indiana and to be able to fund education in the state of Indiana."

Bauer didn't lay out specifics, but he said his suggested city-triggered income tax would be tied to a weighted vote. He said the support of Mishawaka and South Bend, for instance, likely would be enough to impose an income tax in his home county of St. Joseph.