Late Wednesday, Indiana state legislators worked to hash through some wording of a new law, which has a description that appears unremarkable on the list of this session’s bills: “HB 1065: Various tax matters.”
The grab-bag nature of the legislation is revealed by its synopsis, which runs nearly 1,000 words. That made for some complicated politics.
In the Senate it passed 31–18. In the House the tally was 52-40. So now the final version of the bill goes to the governor’s desk.
HB 1065 was important locally, because Bloomington’s mayor, John Hamilton, proposed on New Year’s Day that the local income tax for all Monroe County residents should be increased, to pay for climate action initiatives.
The mayor’s proposal has prompted community-wide debate, not just about what to spend the money on, but also whether the state’s statute on local income tax is fair.
From the perspective of those who object to some of the inequities in the local income tax statute, HB 1065 is an improvement.
But some are hoping legislators in next year’s session will take a more aggressive approach, and allow a city to enact its own separate tax, just on the city, not the whole county. Currently all local income taxes in the state of Indiana are countywide.
What’s the part of HB 1065 that could impact the current local income tax policy debate? It’s the section that changes the way the votes are allocated on the tax council. That’s a body made up of the Bloomington city council, Ellettsville town council, Stinesville town council and the Monroe County council.
It’s the tax council that has to approve an increase to a local income tax in the county.
Passage of HB 1065 means that the votes of each governing entity that’s a member of the tax council are allocated in a more precise way—to the individual elected officials serving on those entities, instead of being allocated as a bloc. Under the new law, when the Bloomington city council votes on a local income tax, the vote of each Bloomington city councilmember counts for 1/9 of 58, or 6.44 votes.
Previously, the 58 votes assigned to Bloomington were cast as a bloc. The new law means that a simple 5–4 majority on the Bloomington city council is no longer enough to enact a tax increase for the whole county. A 9–0 or 8–1 vote on the Bloomington city council would still be enough to do that.
But if there were just seven Bloomington votes in favor, a tax increase would need the 5.29 votes (1/7 of 37) of one county councilor, or each of the single votes (1/5 of 5) from the five members of the Ellettsville town council.
That’s considered an improvement, even if it doesn’t solve every aspect of the tax council’s inequity. So Monroe County councilor Marty Hawk, the sole Republican on the seven-member council, cheered the passage of the bill on Facebook:
Thank you, State Representative Peggy Mayfield, for all your dedicated service to work with Monroe County. HB 1065 passed last evening…The city could still pass the tax but it will take more than a simple majority to do that.
Hawk tracked the bill from the start of the legislative session. As the session wore on, Hawk gave updates at county council meetings and on social media about the progress of the bill, and her work to encourage Republican state legislators to get the bill passed this session.
Mayfield, a Republican who represents District 60 in the state house, and Jeff Ellington, a Republican who represents District 62, were instrumental in getting the bill passed.
Ellington told The Square Beacon that he looked at the previous tax council voting structure as a “loophole.” Ellington contrasted the way the Bloomington proposal has been unveiled with the way he says local income taxes are typically approached. “Generally it’s when the community comes together and proposes something. But [Hamilton’s] proposed use was very divisive,” Ellington said.
The new law includes an expiration date for the tax council voting provisions: May 31, 2021. That’s a signal that the legislature could be keen to follow up next year with further revisions to the local income tax code. One possibility is something along the lines of HB 1033 from 2019, which died in committee. That bill would have allowed municipalities to enact their own local income tax. On that scenario, the question of balancing representation of residents inside and outside of Bloomington would disappear.
On the question of enacting a local income tax to support climate action, Monroe County councilor Geoff McKim favors waiting until next year—to see if the General Assembly acts. McKim told The Square Beacon that things point towards the legislature trying allow for separate local income tax rates for cities and counties—which would allow cities and counties each to set the appropriate rates for their own responsibilities.
What’s the city’s hoped-for enactment schedule? In his New Year’s Day address, Hamilton described his preferred timing for enactment of the tax as “in the next six months.” In his late-February state of the city address, Hamilton said “by summer.”
McKim said he thinks the passage of HB 1065 probably means that Bloomington’s city council would need unanimity in order to pass a new tax before next year. But McKim has not heard anything from Bloomington city councilmembers to suggest that they want to rush it through on a closely-divided vote.
The passage of HB 1065 does not change the approach that Bloomington city councilmember Matt Flaherty is taking to a local income tax increase to pay for climate action. Flaherty chairs the city council’s climate action and resiliency committee. He told The Square Beacon, “Under the old system or with HB 1065, I think it is important to work with all members of the local income tax council to find points of agreement, common interest, and opportunities for collaboration.”
Flaherty added, “This is something I have already been working on figuring out—how to engage all bodies in a constructive conversation—and HB 1065 doesn’t change that.”
About the idea of delaying to see if the legislature acts next year, Flaherty said he thinks it would be difficult to justify delaying action on something he believes is for the benefit of the community, if the justification is based on speculation about what the General Assembly might do in the future.
In favor of a delaying until next year is Eric Spoonmore, who’s president of the county council. Spoonmore said: “I would say: Let’s just wait until next year.” If the legislature acts to provide a city with the power to set local income tax rates inside the city, separate from the county, that would be ideal, and worth waiting one year, Spoonmore said.
An additional consideration, Spoonmore said, is the impact that the COVID-19 pandemic is having on public meetings, and the ability to get thorough input from the public on a possible tax increase.
Spoonmore said his main concern as an elected officials is public safety, saying that COVID-19, and the public health crisis it represents, deserves the full attention of decision makers right now. That’s what community members are concerned about, too, Spoonmore said.
“They’re alarmed by the coronavirus,” he said. Spoonmore said, “That doesn’t mean that we have to stop doing anything else,” but added, “The things that you’re most successful at are what you focus on solely.”