Mayor’s state of city address reiterates sketch of New Year’s Day local income tax proposal; more info possible at March 5 city council event

Last Thursday’s “state of the city” speech by Bloomington’s mayor John Hamilton focussed on the 2020s as a “make or break decade,” in light of the challenges posed by climate change.

The news out of the speech was a planned public meeting  about the topic of a possible increase to the local income tax to pay for climate action initiatives.

The meeting is to be hosted by the city council on March 5 at The Mill starting a 7 p.m. Additional details on the meeting weren’t immediately available from the mayor’s office.

City councilmember Matt Flaherty sent a message to The Square Beacon Friday morning saying that the agenda for March 5 is still in the works. The primary focus will be public engagement and gathering input from the community, Flaherty said.

Hamilton’s announcement about the March 5 local income tax meeting came after he ticked through several climate-related initiatives already in place, like the city’s sustainability plan, a greenhouse gas inventory, and a climate vulnerability assessment that’s underway.

Spontaneous applause from the audience at the Buskirk-Chumley Theater came in response to Hamilton’s mention of Bloomington’s achievement of “A List” status among 10,000 cities around the world that are a part of the Global Covenant for Mayors for Climate and Energy.

Based on work done so far, Hamilton described Bloomington as being well “positioned” but not necessarily well “provisioned” to take climate action. The provisioning could come from the possible enactment of an additional 0.5 points to the local income tax, bringing the income tax paid by Monroe County residents to 1.845 percent of annual income.

The local income tax proposal was also a highlight of Hamilton’s address given seven weeks ago on New Year’s Day. It’s the city council that would need to act to implement a local income tax increase.

In his speech, Hamilton characterized the tax increase as costing “$50 annually for every $10,000 of taxed income.”

An additional 0.5 percent of income tax would mean that a Bloomington family with median household income of $34,435, would pay an additional $172 in tax annually.

All residents of the county, not just Bloomington residents, would pay the tax, if it’s enacted. Given Bloomington’s 58 votes out of 100 on the county’s local income tax council, Bloomington’s city council could enact the tax, without additional support from Monroe County’s county council or the Ellettsville town council. A 5–4 vote on the Bloomington city council would be enough to enact the tax for all Monroe County residents.

A bill under consideration in this year’s General Assembly session (HB 1065) would change the tax council voting scheme to allocate the proportion of votes to each individual member of the governing bodies making up the tax council. For example, instead of assigning the city council a bloc of 58 votes, each city councilmember would get 6.44 (58/9) votes. The bill made its way out of the house and is scheduled for another meeting of the senate’s committee on tax and fiscal policy set for Tuesday (Feb. 25).

When Hamilton announced his proposal on New Year’s Day, the $8-million figure he gave was for estimated total amount the tax would raise in Bloomington in a year. During Thursday’s speech, Hamilton was focussed on the 2020s as a decade, so the figure he named was $80 million. If enacted, Monroe County’s government would also have roughly an additional $80 million to spend in the next 10 years.

The city of Bloomington has set up a page with answers to “frequently asked questions” about the possible higher income tax. The title of the page refers to the fund that Hamilton has suggested be established for proceeds of the additional tax—the sustainability investment fund.

The answer to one of the questions on the web page indicates that Bloomington’s administration does not accept the view that flat income taxes have a disproportionate impact on low-income earners:

Won’t this tax have a disproportionate impact on low-wage earners?
Not at all.  Unlike a flat tax on purchases, this tax is proportionate to income, so low-wage earners will owe less than those with greater incomes.  Furthermore, the funds generated by the tax will have a greater positive impact on low-wage earners, who are most vulnerable to the effects of climate change.  Using the tax revenues to build affordable/workforce housing, help businesses develop resilience, and attract new employers to the area could benefit low-wage earners in particular.

It’s an arithmetic fact that flat income taxes are proportionate to income. For a household making $3,443,500—10 times the median income for Bloomington—0.5 percent would be $17,200 in tax. For a household making $34,435, 0.5 percent would mean an additional $172 in tax.

Still, the impact of a flat tax is often analyzed as disproportionately affecting lower-income households, because the basic cost of living does not change as income changes. For a household where most or all available income goes towards paying for basic costs of living, any tax increase affects that household’s ability to cover basic costs. For higher-income households, the ability to cover basic costs is not affected as much.

In his speech, Hamilton indicated that whatever extra tax that low-income earners pay, they should get more than that back in benefits. Hamilton said the city should “be sure to invest in changes that will produce much more than that in benefits to our lower-income residents: better transportation options, and housing options, and energy options, and food options.”

On Thursday, Hamilton tried to give an idea of the scale of the impact of investment in different areas. Hamilton said an extra 0.5 percent in local income tax could mean a potential 40-percent increase to Bloomington Transit’s operating budget, a doubling of affordable housing investments, a doubling of clean energy supports, and a quintupling of local food support.

The 2020 approved budget for Bloomington Transit was about $14 million. That included $4 million for four battery-electric buses, which will be purchased only if BT wins grant awards for them.

Among the community’s proposals for increased transit investments, which have received some support from transit advocates, even before Hamilton’s New Year’s Day announcement, are adding Sunday service and making service generally more frequent. Social media conversations since Jan. 1 have included discussion of making public transit fare free in Bloomington, following the example of Kansas City.

The basic theme of Hamilton’s Thursday speech stemmed from the upcoming census: Everyone counts. The Square Beacon counted 11 uses of the phrase “everyone counts” in Hamilton’s speech. Census Day is April 1.

On Thursday, city council president Steve Volan addressed the audience before the mayor. Volan highlighted the way university students are supposed to be counted in the census—where they “usually reside,” which is in Bloomington.

Volan’s role at Thursday’s event was to convene the special session of the city council, of which Hamilton’s speech was a part. A roll-call vote taken by city clerk Nicole Bolden confirmed five members were present, which was enough for a quorum.

The council’s March 5 event at The Mill, for public input on the local income tax, did not have a formal city council meeting notice included in the council’s most recent information packet posted to the city’s website on Friday (Feb. 21). The meeting is listed on the council’s Google calendar.