EDITORIAL: Commuter tax needs fences

IBJ Staff
February 1, 2014
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IBJ Editorial

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.•


Send comments on this editorial to ibjedit@ibj.com.


  • Not good for city
    Some Indianapolis businesses have to be located in Indianapolis, but many do not. Giving business another reason to boost Greenwood, Brownsburg, Zionsville, Fishers, and Carmel, etc… seem a bit risky. Also, I am wondering how people, goods and services enter into and exit from Indy without driving on the roads in Hendricks, Johnson, Boone, and Hamilton counties. If we start taxing surrounding counties Indy might get a taste of our own medicine down the road. People who live outside Indy, but work here also buy lunch, shop, visit cultural destinations, etc… in our city. Eroding the tax base by taxing business out of Indy is bad enough, but what about all the Indy businesses that benefit from people coming in and out of our city. Finally we put our reverse commuters at risk of being taxed by surrounding cities.
  • Bite the Hand That Feeds You?
    Would expect opposition from non-residents working within our city, but venomous threats? No man is an island. Which came first, the house you now have or your choice of employment? I believe a recent fact stated showed something like 1 out of 8 non-agricultural jobs in Indiana were in MARION county and noted the vitality of Indianapolis is vital to our entire state and thus the need for state government to realize legislation for this, mass transit and many other needs in our world of today.
  • Alternative proposal
    Since we're dreaming, allow me to suggest an alternate proposal. Instead of enshrining and extorting out-of-town commuters, people who really don't like the city in the first place, how about we focus on making Indianapolis a better city for people who do live here or want to live here? Make it a great city and more people will move here, creating a larger tax base obviating the need for a commuter tax. Part of making an Indianapolis a great city is undoing the existing concessions to commuters. Undo the high-speed one-way streets and return them to their communities. Remove the extra lanes that increase speed and lower property values (and tax revenue!) on commuter routes like College Ave and Fall Creek Parkway. Change regulations and incentives that have resulted in a glut of parking lots and garages downtown. Build IndyConnect while simultaneously narrowing and slowing the roads, and reduce our oversupply of parking, commuters who don't like Indianapolis in the first place can wait in traffic or take the bus. We'll do much better making Indianapolis a livable city for its residents than by extorting commuters who don't like the city in the first place.
  • splitting the same pie
    Our companies all pay taxes to support Indianapolis. Hitting commuters on top of what our companies pay is stupid. The fact that the city has so mismanaged its resources shouldn't have to be paid for by people who come in and spend money in the community (yes we shop and eat in the community supporting businesses and jobs) when we already pay sales taxes and lucas oil stadium taxes when we do so. A commuter tax will encourage folks not to spend money in marion county since they are already being taxed for working there. Eating at restaurants and shopping supports jobs, while a tax on commuters won't. Which do you want???

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