EDITORIAL: Commuter tax needs fences

February 1, 2014

Indy Chamber might incite a little road rage by proposing a commuter tax that would allow Indianapolis to collect revenue from those who work in the city but live outside county lines.

It’s a commendable move, though, given the logic and fairness inherent in asking 200,000 people who travel into Marion County for work to help pay for the roads and public safety they enjoy. And it’s a good idea to think regionally since you cannot be a suburb of nothing.

But such a tax should come with strings, since politicians tend to see more taxes as the solution for most every problem.

For starters, how about a statutory cap on state income taxes? A maximum of 6 percent—including local income taxes—seems reasonable. (Marion County residents now pay 1.62 percent in addition to their 3.4 percent state levy.) Indiana officials are rightfully proud of our low-tax environment for business, but the state won’t stay competitive by socking it to individuals.

The income-tax scale also should be based on wages: Indiana is one of just seven states that charge the same rate for everyone, a fact former Gov. Mitch Daniels tried unsuccessfully to change. One option would be to tack on a modest commuter tax only for those above a certain income threshold, capturing revenue from executives of Indianapolis companies who live elsewhere.

A second set of strings could govern how commuter tax revenue is used. The funds should be spent on clearly defined services or public infrastructure, not turned into a pool of money to subsidize private real estate developments and sports franchises.

A commuter tax is not a new idea. A policy study group in 2006 called for a local option income tax of up to one-quarter of a percent collected by the county where a person works. Assuming an average commuter income of $50,000, such a tax would generate $25 million per year for Marion County. That could make a big difference for a city with more workers who live elsewhere per capita than any of its U.S. peers, thanks in large part to the broad boundaries created by Unigov.

But the change will require a change in state law, one Indy Chamber vows to push starting with the 2015 legislative session. CEO Michael Huber, who served as deputy mayor for economic development under Indianapolis Mayor Greg Ballard, called the issue one of the group’s top five priorities.

The effort will run into plenty of opposition since it would raise taxes, but also because some will see it as only benefiting cities. Sen. Brant Hershman, R-Buck Creek, called the idea “in essence taxation without representation.”

Actually, the situation is more like representation without taxation. Downtown office buildings have ample representation—of folks from Avon, Carmel, Fishers, Greenwood and Noblesville who enjoy the services of the big city without paying its sky-high property taxes.•


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