Friday, July 25, 2014

Tully: Marion County Commuter Tax is Fair

By Matthew Tully in the Indianapolis Star:

I’ve found that having a calm discussion about the issue of a commuter tax is nearly impossible. Even the mention of one leads to immediate, angry responses from those who either hate taxes in general or, quite understandably, don’t think their income taxes should be captured by a county other than the one they call home.

A man wrote me a couple of years ago to protest the very idea of a commuter tax, which has been both discussed and stalled for decades around here, and his protest summed up the opposition well: I moved out of the city, he told me, to get away from its problems. And one of those problems, he said, was the cost of paying for the city’s many other problems.

So I come today in peace, understanding the built-in opposition about commuter taxes but hoping to raise a few questions and start a conversation. It’s an important one because the numbers make clear that something must be done to improve Marion County’s financial situation, and it is inherently unfair to have the residents of the county accept alone the cost of funding public safety officers and road paving, and so much else, when those things clearly improve the lives of suburban residents who rush in for work five days a week.

So to the questions:

•If we were creating a tax system from scratch, would we really create the current system — one in which only the home county of a worker receives income tax revenues generated by the worker’s job, regardless of where the job is located? Or would we consider it fair to keep at least a portion of the taxes in the county that hosts the workplace, that provides public safety for that workplace, and that has built roads, sidewalks and sewers to serve that workplace and its workers?

The proposals on the table do not suggest that Marion County should receive all of the income taxes generated by jobs insides its boundaries. Not even close. What is being discussed, in the most preliminary stages, is perhaps a quarter of one percent of income tax staying in the county where the job is located — whether that job is in Hamilton County, Marion County or anywhere else.

•Aren’t we a region that depends on mutual success? What happens in Indianapolis has a great impact on the quality of life throughout Central Indiana, and if Indianapolis cannot afford the amenities that help attract jobs and young workers, because basics such as policing and infrastructure gobble up every available tax dollar, that will have dire consequences across the region.

•Is it fair that Indianapolis subsidizes jobs but then often fails to enjoy the income taxes generated by them? If you work at the Statehouse or a local hospital, you benefit by working on tax-exempt property in Indianapolis. And the large amount of tax-exempt property in Indianapolis has a significant impact on its bottom line.

If you work at a stadium, convention center or many other buildings and work sites, or if your job is tied to them, you benefit from the tax breaks Indianapolis provided to create your job. Quite often, Indianapolis provides property tax breaks that allow companies to locate, expand and create new jobs, but then the city loses the income taxes generated by those jobs when employees settle in the suburbs.

Here’s one outsized example: Indianapolis has spent hundreds of millions building and upgrading the basketball arena that houses the Indiana Pacers. But if team executives or players live in Hamilton County, all of the local income taxes they pay on their seven-figure incomes stays in the suburban county. That is clearly unfair, and past studies have shown that roughly 200,000 workers commute into Marion County each week from surrounding counties.

•Finally, doesn’t it make sense to make sure that the economic engine of Central Indiana, and of Indiana, continues to grow and improve?

The current tax system is simply unfair. And it’s added to a serious problem.