Local income tax notebook: How Monroe County stacks up statewide

During a Feb. 24 speech, Bloomington mayor John Hamilton made explicit what had been implicit since last fall’s budget deliberations: Some kind of request for a local income tax increase would be put in front of the city council this year.

During the February speech, Hamilton put some effort into establishing the need for more revenue—to fund programs, from basic services, like public safety, to climate action.

The plan to generate more revenue is not limited to increasing the local income tax.

Part of Hamilton’s pitch to the city council to approve the 2022 budget included a planned issuance of $10 million in bonds to support climate initiatives. Issuing those bonds will translate into a property tax increase.

Hamilton’s February speech tried to make a preliminary case for the idea that Bloomington and Monroe County’s comparatively low existing tax rates—both income and property tax—give the city room to raise the rates for both kinds of taxes.

In more detail, here’s what those numbers look like.

Monroe County’s 1.345 percent total local income tax (LIT) rate is just 70th highest of 92 counties. From the opposite angle, that’s the 23rd lowest LIT rate out of 92.

Monroe County also has the lowest LIT rate among its immediate neighbors. Starting at 12 o’clock and working clockwise here’s how they stack up against Monroe County’s 1.345 percent: Morgan (2.72%); Brown (2.5234%); Jackson (2.1%); Lawrence (1.75%); Greene (1.95%); and Owen (2.5%).

Based on data from Indiana’s Department of Local Government Finance, among the state’s 22 biggest cities (leaving out Indianapolis), Bloomington’s property tax rate of 0.6075 is 17th highest out of 22.

Comparing rates, for either income tax or property tax, is open to criticism that a lower rate on a higher value can still lead to paying a higher amount. Property values are relatively high in Bloomington, which means that the property tax rate does not need to be as high, to generate the same amount of revenue. The same reasoning could apply to Bloomington’s relatively high wages and the local income tax rate.

One approach to comparing local government finances that does not rely on tax rates is to look at per capita revenue generation and spending.

On that score, Bloomington’s property per capita tax levy of $307 (across the whole population, not just property owners) is 15th highest out of the 22 biggest cities in the state. Bloomington’s per capita general fund appropriation of $604 is 14th of the 22 biggest Hoosier cities. [Shared Google Sheet with comparative DLGF data]

 

Vertical blue line = 1.845 percent, which is the LIT rate Monroe County residents would pay if the current rate were increased by a half point.
Monroe County boundary highlighted.

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