A growing fiscal crisis is forcing the lone Indiana county without a local income tax to begin considering one.
Lake County has long refused to implement the local tax that 91 other counties have approved. Officials argue it's unfair to working people because business income is exempt. But state officials say the county relies too heavily on property taxes that place a burden on businesses, and lawmakers have penalized the county for its refusal to adopt a local tax by freezing the total amount of property taxes it can collect since 2007.
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Lake County's municipal and township government units have lost tens of millions of dollars in recent years to the freeze on the property tax levy and to a separate statewide law that caps the amount of taxes collected on any single property. Plunging property assessments during the recent recession and housing crash have compounded the situation.
The county has cut 300 jobs and borrowed $15 million this year to avoid either deficit-spending or making even deeper cuts. Larger fiscal problems loom in 2014, and council members said they don't want to borrow more.
County officials have discussed imposing an income tax rate of 1.25 percent to 1.5 percent of an individual's income to cover rising costs to operate the county jail and pay for a plan to consolidate the county's emergency police and fire communications network.
A bill pending in the state Senate would give the county an incentive to pass a 1 percent income tax. Senate Bill 585 would unfreeze the county's property tax levy and authorize local officials to spend three-fourths of the estimated $96 million the income tax generates on any government operational need.
The remainder of the money would help with economic development projects.
The bill has passed the Senate and is awaiting action in the House of Representatives.
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