While they are waiting to see how the Indiana legislature votes in this year’s lawmaking session ending April 29, Porter County leadership has largely resigned itself to the need to raise the local income tax or LIT. At 0.5% Porter County has the lowest LIT of the state’s 92 counties.

LIT is a tax on the adjusted gross income of individuals who live in the county. “This isn’t necessarily what your salary is,” explained Jason Semler, principal with Baker Tilly, the county’s municipal advisor, at a workshop for county leadership Thursday afternoon. “This is what you report to the state as adjusted gross income after deductions.”

Currently, a household with an adjusted gross income of $50,000 has an annual LIT impact of $250. That goes up to an annual impact of $500 for a household adjusted gross income of $100,000 and so on.

Senate Bill 1 aims to put a freeze on property taxes in the state for three years. Should it pass into law “that’s going to be devastating to you guys,” said Simler. “I think that’s going to force a lot of counties to look at increasing LIT.”

He added that a lot of counties have better cash balances than they’ve ever had thanks to the infusion of American Rescue Plan Act money during the pandemic. Porter County received $33 million in ARPA grant money.

“They’re looking at cash balances and maybe how healthy they are,” Semler added of his take on how the Indiana General Assembly is viewing local county coffers. “We would have had this conversation three years ago if it weren’t for American Rescue Act funds,” added Board of Commissioners President Jim Biggs, R-North.

The county with the next highest LIT is nearly double Porter County’s, while the mean is 1.95% and the highest is 3%. The maximum allowable LIT in Indiana is 3.5%. “Say SB 1 passes and you’ve maxed out your LIT. What do you do?” asked Chief Deputy Auditor Ryan Kubal.

“That’s a good question,” Semler replied. “Some of these counties, they’re going to start getting close.”

The Porter County Commissioners, Council, auditor’s office, treasurer, and county attorneys were in attendance to learn their options from Semler, get questions answered, and begin working toward a decision of whether to raise the LIT, how much, and for what purposes.

All members of the commission and council were present except Councilmen Jeremy Rivas, D-2nd, and Greg Simms, D-3rd. Semler explained there are three “buckets” of LIT: property tax relief capped at 1.25%; expenditure that can’t total more than 2.5% for the seven subcategories it is allowed to fund; and special purpose which has caps specified by state statute.

Of these categories, Porter County currently assigns all of its 0.5% LIT to the economic development subcategory under the expenditure bucket. “So not only do we have the lowest LIT, but a big chunk of it ($3.5 million annually) is going to the RDA (Regional Development Authority),” said Commissioner Barb Regnitz, R-Center.

Regarding the RDA, Semler explained that while normally homestead exemptions, also known as homestead credits, are part of the property tax relief bucket, for Porter County they fall under the economic development bucket due to the unique circumstances that have Lake and Porter counties the only two in the state funding an RDA by statute.

As the workshop title implies, those present used the meeting to clarify how LIT, or any changes to Porter County’s iteration, functions. New Councilwoman Michelle Harris, R-At-Large, clarified that Social Security benefits are not subject to LIT. “If all of your income is Social Security you would not be taxed on that,” Semler agreed.

Biggs wanted to know if residents would benefit from their property taxes going down, while Regnitz wanted Semler’s opinion on whether it was better for the taxpayers and county respectively to pay more in property tax or income tax. Semler said for residents “it kind of depends on who you are,” whether residents “are land-rich or not.”

From the county’s perspective, “property taxes are more secure. If you’re looking at bonding, property taxes are more secure,” though he did concede that income tax bonds are sold all the time as well.

While no specific preferences on increased amounts or categories were floated by county leadership, Semler did agree with Regnitz’s question if they should be ready to run some scenario models after the legislative session ends. The council would be responsible for voting for a LIT increase with a simple majority.

If an ordinance to raise the LIT were adopted between Jan. 1 and Aug. 31 this year, taxpayers would begin seeing increases in withholding on their paychecks Oct. 1, with the county receiving the monies in 2026. If a LIT increase was voted between Sept. 1 and Oct. 31, taxpayers would see further withholding Jan. 1, 2026, and the county would receive that money the same year.

An increase between Nov. 1 and Dec. 31 would see withholding on paychecks Oct. 1, 2026, with the county receiving the money in 2027.

Council President Andy Vasquez, R-4th, doesn’t have a specific timeline in mind for an increase he feels is necessary, except he wants “for people to know that by 2026 this will occur. That gives them time to adjust their family budgets.”

Shelley Jones is a freelance reporter for the Post-Tribune.