A Senate committee approved legislation Tuesday that may make it more palatable for the Lake County Council to enact an income tax, and thaw the state-imposed property tax levy freeze that has forced many Lake County cities and towns to make painful budget cuts.
Senate Bill 585, sponsored by state Sen. Ed Charbonneau, R-Valparaiso, was amended by the Tax and Fiscal Policy Committee to change existing state law on how money collected by a Lake County income tax must be spent.
Current law requires all the money from a Lake County income tax of at least 1 percent to be used for property tax relief. Charbonneau said the 2010 addition of property tax caps to the Indiana Constitution reduces the need for that.
Under the measure that advances to the full Senate, Lake County must still adopt a 1 percent income tax to unfreeze its levy. But three-fourths of that revenue can be spent on general county needs, with the remainder having to go toward economic development projects.
Charbonneau said the change could result in up to $96 million in annual new spendable revenue for the county if the proposal becomes law and a local income tax is adopted.
The legislation prohibits Lake County from enacting an income tax rate of more than 1 percent and, once enacted, the rate cannot be increased, decreased or rescinded. It also still gives the governor a veto over Gary airport board members and provides for studies of a Gary port and trauma hospital.
Lake County is the only Indiana county without a local income tax. Seven years ago, the state punished Lake County by capping the property tax revenue of all local governments in the county at their 2007 levels until the county adopts an income tax.
That levy freeze has reduced property tax levies in nearly every Lake city and town, especially Hammond, East Chicago and Gary, which have each seen their levies drop more than 40 percent.
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