New options emerge to divvy up Lake County income tax

BY PATRICK GUINANE and BILL DOLAN,
Times of Northwest Indiana Staff Writers

INDIANAPOLIS | Region legislators are working with the Lake County Council to craft a new menu of distribution options that might make a local income tax more palatable.

Under a state law approved last year, most local governments in Lake County face budget freezes until the council adopts a 1 percent income tax dedicated to property tax relief. The tax was defeated last month, with mayors and county officials complaining the state had not given them an equitable option for divvying up the roughly $80 million in proceeds.

State Sens. Sue Landske, R-Cedar Lake, and Earline Rogers, D-Gary, have been working with Highland Clerk-Treasurer Michael Griffin and new Lake County Council President Christine Cid, D-East Chicago, to design a more agreeable distribution formula. The group has arrived at four options:

-- Apply the income tax proceeds to county government levies, so that all property taxpayers benefit equally.

-- Use the income tax money to provide property tax relief in the school district where it was raised. Taxpayers must list their local school district on state income tax returns.

-- Return the income tax money to property owners in the city where it was raised. A new city code would have to be added to state tax returns.

-- Distribute 60 percent of the money to property owners in the city where it was raised and the other 40 percent by population.

Cid said neither she nor other council members endorse any particular formula, but she said the proposals are meant to start debate on a more agreeable alternative. Both Landske and Rogers stressed that they're not trying to force any of the four options on the council.

"Because of the shortness of the legislative session, there was a need to get something started," Rogers said.

Landske said she will try to amend the distribution options into Senate Bill 20, which is scheduled for an 8 a.m. hearing Tuesday in the Senate Tax and Fiscal Policy Committee. She said she will continue to listen to other suggestions from local officials.

"This is just a start," Landske said. "It's not cast in stone."

Lake is the only county in the state without an income tax.

The council failed to override a veto by county commissioners last month after twice approving the tax, opting for a different distribution scheme each time. Under both scenarios, variations in property tax levies and income left some communities with more or less property tax relief than they paid as income tax.