Study finds local income taxes effective in reducing property taxes

A new study of Indiana taxes finds that Local Option Income Taxes are complicated and confusing, yet effective.

The Indiana Fiscal Policy Institute teamed up with the Indiana University Public Policy Institute to conduct the study.  It found that the income taxes imposed almost 40 years ago led to a reduction in property taxes as planned.  “Our report finds that local option income taxes have been very successful in fulfilling their mission as they were first introduced in 1973 and took effect in 1974,” said John Ketzenberger of the Fiscal Policy Institute.

91 of Indiana’s 92 counties impose a local income tax.  The only exception is Lake County.  “In total statewide counties use approximately only half of the capacity of that local option income tax system,” said Matt Nagle of Indiana University.

Local Option Income Taxes account for 20% of tax revenues to local governments in Indiana.  The study also found that the system is sometimes confusing and complicated and could benefit from efforts to streamline it at the state level.

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