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June 17, 2009

Tipton ready to enact LOIT

New income tax would compensate for $180,000 loss in property taxes.

By Daniel Human

TIPTON — Tipton County residents who got a break when Indiana passed a law establishing a ceiling for property tax increases could make up the difference with income taxes.

The Tipton County Council decided at its meeting Tuesday that it would put together an ordinance implementing a Local Option Income Tax.

The tax would compensate for a projected countywide deficit of about $180,000 because of Indiana’s circuit breaker law. The city of Tipton will account for more than half of that loss, losing about $96,000 from a city budget that disbursed about $34.5 million in 2007.

Indiana’s circuit breaker went into effect in 2008, capping 2009 property taxes for homesteads at 1.5 percent and other properties at 2.5 percent or 3.5 percent. The cap will decrease another .5 percentage points across the board beginning in 2010.

The circuit breaker will cause the county’s losses to grow to about $442,033 in 2010 and about $492,000 in 2011.

To remedy the deficit, council members proposed the county adopt one of three LOIT proposals.

Option A would freeze property tax rates, and the county would institute an income tax, which can not exceed 1 percent.

Council President Brad Nichols used a rate of .25 percent as an example at Tuesday’s meeting. The rate would collect more than $800,000, based on what Tipton County residents paid in property taxes in 2007.

Residents who attended the meeting brought up concerns about how far that figure would surpass the needed amount of $180,000, but Nichols assured them the council would figure out a more appropriate tax rate before its July 21 meeting.

Option B would replace property tax relief dollar-for-dollar, which is the LOIT plan Howard County has implemented. The county would collect the tax from one of three groups: homeowners only, homeowners and renters, or all taxpayers.

Option C could only be implemented if the other two options are as well. It would provide .25 percent of the LOIT to public safety. In Tipton County, the money would go toward establishing a county-run ambulance system, Nichols said.

Nichols pointed out that Tipton County residents who work in Howard County are already paying a LOIT.

“But we’re not receiving the benefit,” he said.

Tipton County resident Jim Ashley said during the meeting that implementing a LOIT would place more tax burden on non-property owners.

“In my opinion, the property tax relief that we got was initiated not as a tax issue, but as a fairness issue,” Ashley said. “… We weren’t fairly assessing the properties. Now we’re shifting the burden of that relief, which property owners got a year ago, to the businesses.”

During the discussions, Tipton Mayor Dan Delph said he would like a LOIT to be enacted in Tipton.

The council agreed to discuss a LOIT ordinance at its July meeting. In the meantime, Nichols said, council members will figure out what the rates should be for each of the options. The council will then discuss what option is the best at its July meeting.

The council discussed implementing a LOIT last year, but it did not think the county and cities had enough need at the time to warrant a new tax.

If a LOIT ordinance is approved, state law requires the county to revisit it every year to determine if any changes in rates are needed.

• Daniel Human is a Kokomo Tribune staff writer. He can be reached at (765) 454-8570 or at daniel.human@kokomotribune.com.

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