Monroe County income tax rate to rise to 2.205% in 2027
Monroe County’s income tax rate will rise from 2.14% to 2.205% on Jan. 1 after the county council voted unanimously to restore the juvenile-services rate to 0.095%. The increase amounts to $32.50 a year more for a taxpayer with $50,000 of taxable income.
Monroe County’s local income tax rate will rise from 2.14% to 2.205% on Jan. 1, 2027, after the county council voted unanimously Tuesday (Sept. 8) to increase the special-purpose rate that pays for juvenile services.
The council took final action on the ordinance the same night it was introduced, after a public hearing when no member of the public spoke. County attorney Molly Turner-King told councilors that adopting it on first reading required a unanimous vote. And all seven councilors voted yes.
Only one piece of the county’s overall income tax rate will increase. The special-purpose rate increases from 0.03% to 0.095%. The correctional facilities (jail) rate stays at 0.17%, and all the other components remain unchanged. The result is an overall increase of 0.065 percentage points.
In dollars and cents, that increase amounts to 65 cents for every $1,000 of income subject to the county tax. For a taxpayer with $50,000 of such income, the increase is $32.50 a year.
The increase restores a juvenile-services tax rate that the council twice reduced in the last couple of years, as part of its effort to create, and then increase, a separate income tax to build a new jail.
In 2023, the council established the correctional facilities (jail) LIT at 0.01%, giving the county a new revenue stream that could help pay for requested mental-health positions at the jail. At the same time, it cut the special-purpose juvenile-services rate from 0.095% to 0.085%. The two changes canceled each other out for taxpayers, leaving the overall LIT rate at 2.035%. The new correctional rate was expected at the time to generate about $425,000 annually.
The idea was to draw down the considerable fund balance in the special purpose fund, which had started to accumulate. At that point, it was thought that the fund balance would last for a decade or more, without a return to the higher rate.
The council used the same approach on a larger scale in 2024 as it moved toward generating enough correctional LIT revenue to help finance a new jail and justice center. The special-purpose rate was cut again, from 0.085% to 0.03%, cushioning the effect of the much larger jail-tax increase. The correctional rate ultimately landed at 0.17%, producing the current combined rate of 2.14%.
But the more substantial cut to the rate meant that the special purposes fund balance would be drawn down way quicker. That 0.03% juvenile-services rate was not intended to be sustainable for very long.
At the county council’s Aug. 25 meeting, Turner-King said the existing 0.03% rate was not enough to sustain operations at their current level. Councilor Kate Wiltz said a review of FSG’s financial analysis and budget requests from the courts, probation and Youth Services Bureau showed that a 0.095% rate should be sufficient to fund those requests for the next two years.
At that point, a new tax system will be in place that erases all the different categories of local income tax. A meeting of officials from Monroe County, Bloomington, Ellettsville, and Stinesville is set for Sept. 18 to discuss the new income tax system. It’s a meeting of the so-called MUST (municipal unit strategic taskforce). The MUST is a creature of the SEA 1 legislation that dramatically revised the property and income tax systems in the state of Indiana.
Tuesday’s vote effectively completes the unwinding of the offsets that had softened the introduction of the jail tax. Before the correctional LIT existed, the county’s total rate was 2.035%. With the juvenile-services rate restored to 0.095% and the correctional rate remaining at 0.17%, the total will be 2.205%. That’s exactly 0.17 percentage points higher than the pre-jail-LIT rate.
Before approving the ordinance Tuesday, councilors also corrected its legislative history in the whereas clauses. The original version said the most recent change to the special-purpose rate had been its 2023 reduction to 0.085%. The council amended that wording to reflect the subsequent Oct. 8, 2024 reduction to 0.03%.
The adjustment in the special services LIT on Tuesday, with its historical ties to the jail LIT, comes against the backdrop of questions about a potential new jail that are mostly unanswered. A new lawsuit, which was filed against county government officials in July over conditions at the existing jail at College Avenue and 7th Street, now has a timetable that stretches well into 2027.
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