This was predictable. You had to know that if municipalities were given the chance, they would initiate municipal income taxes. Marion County leads the way, to ruin. From the Indy Star report:
Two members of the City-County Council are proposing a county income tax to raise about $33 million.That's a curious way of providing tax relief, by proposing the inititation of a new tax.
The proposal from council member Jackie Nytes would levy a County Economic Development Income Tax to help pay for the IndyGo bus service and to make up money expected to be lost by next year’s planned elimination of the state’s inventory tax.
“Unfortunately, the State Legislature has resisted efforts from local officials to have more control over funding for local projects, services and operations,” Nytes said in a council news release issued Friday night.
“We are offering this proposal as a starting point for discussion of how we fund local governments, provide tax relief to citizens, and address the elimination of the inventory tax. I'm sure it will be amended along the way.”
Here's an idea: CUT SPENDING. Put that at the top of the list of items for discussion on how to balance the books. Increasing taxes is only one way to accomplish that goal.
Municipal taxes lead to the destruction of core cities. I have witnessed this in Cleveland, where the municipal tax was 2% when I lived there. Eventually, towns and cities get to haggling over the rightful collector of the tax.
I lived in Cleveland, but worked in suburban Parma. Both wanted 2% in munipal taxes. After two years of this nonsense, I moved to Parma, thereby preserving 2% of my income. Two years after that, I moved to Indiana, where there was no municipal income tax, thereby preserving another 2%.
Here's the most devastating part: the more you make, the greater your incentive to leave. The 0.35% that Nytes proposes isn't a whole lot to a person making $18,000/year, but is to someone making a million a year. Cleveland's experience was that people of means simply left, leaving only the poor and lower middle class. The city- not only the inner city, but even the fringes- suffered as people of means fled for the suburbs.
That's what Indy is headed for if they pass this tax.
It's really stupid, because Indiana was very competitive relative to the states east of it when I got here. The state income tax was lower, property taxes were lower, and there was no municipal income tax. I calculated that I preserved fully 7% of my income when comparing the Cleveland residence to the Indianapolis residence.
Now, the property taxes are nearly even. Now, Indianapolis is considering a tax hike to support IndyGo, which is already supported by taxes to the tune of 80% of its revenue.
I'm really glad I left Marion County for Hamilton County. I'm just very afraid that Hamilton County is going to reinvent Marion County, and make it another place to flee in order to preserve income. That would be a shame.