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County income tax revenue soars; towns and homeowners to benefit

 

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By VICKI URBANIK

The amount of money that Porter County’s income tax will generate for next year is higher than previous estimates, meaning that homeowners will get a bigger break on their property taxes and municipalities and the county government will get more to spend than anticipated.

Indiana Gov. Mitch Daniels on Tuesday announced the certified distributions of county income taxes for 2006. After two years of keeping the distributions to each county about the same as they were in 2004, the state has now adjusted the figures for next year, resulting in higher amounts for practically every county in Indiana that has a local option income tax.

For Porter County, the increase is a double dose of good news.

This year, the county government, cities and towns shared a total of $7.27 million from the County Economic Development Income Tax, with the money distributed to each based on population.

The comparable distribution for 2006 is now projected at $8.4 million -- or about $1.2 million more than this year and last year. Although the name of the tax includes “economic development,” the law has changed so that the taxing units can spend CEDIT on just about any kind of expenditure and are no longer restricted to spending the money on capital or economic development projects.

The increase means, for example, that the town of Chesterton, which is to get a total of $519,288 from CEDIT this year, is projected to get $603,072 next year.

The county government, which is to get $3.036 million this year from CEDIT, will get $3.526 million next year.

But the amount of CEDIT money going to the municipalities and the county government is now just one-half of the CEDIT total. The Porter County Council this year doubled the CEDIT rate from 0.25 percent to 0.5 percent in order to join the new Northwest Indiana Regional Development Authority.

In accordance with the RDA state law, the first $3.5 million from the higher CEDIT tax will go toward the RDA and the rest will go toward the homestead credit, which cuts property taxes for owner-occupied homes.

That all means that Porter County will get to distribute $4.94 million toward the new, county-funded homestead credit, higher than earlier estimates that put the total at around $4 million.

Just how much savings homeowners will see from the county homestead credit is yet to be finalized, but some have projected that the savings will be at least 10 to 12 percent countywide.

The homestead credit is now funded solely by the state. This year, the credit is 10.2 percent in Chesterton in Westchester Township; homeowners get to deduct that from their gross tax. In Valparaiso in Center Township, the credit is 10.7 percent; in unincorporated Jackson Township, it’s 8.87 percent and in Liberty Township, it’s 8.94 percent. Not considering any changes in the state-funded portion of the homestead credit, those percentages will now increase in ‘06 due to the new CEDIT-funded homestead credit.

Why the Jump?

In both 2004 and ‘05, the state distributed practically the same amount in income tax money to counties. In Tuesday’s announcement, the governor said that all but two of the counties will see an increase in 2006. Of Indiana’s 92 counties, 89 have at least one form of an income tax.

Charles Schalliol, director of the Office of Management and Budget, said the 2006 increases were due to several factors.

First, individual income tax returns in 2005 were 7.5 percent higher on average than in 2004. The distribution to each county is based on the income tax returns from the previous year.

Second, the Indiana Department of Revenue has processed more tax returns in the first half of this year than it did last year. Under a new law, counties receive the actual amount reported by taxpayers on their tax returns, so the amount of county tax money distributed depends directly on the number of returns the state processes before June 30.

As of June 30 this year, the state had not yet processed 33,000 tax returns, far lower than the 249,000 not processed the year before.

Schalliol also said that most counties are now “paid up” after several years of funding discrepancies. Previously, there was a two-year lag between the time that the state estimated the distributions to each county and the reconciling of those amounts with actual tax collections. The state would estimate future tax receipts. When the recession hit a few years ago, the state overpaid counties. That overpayment was reconciled over several years of smaller distributions to each county. The state law changed in 2003, to require that each county’s share of income tax money is based on the actual amount reported, not estimates.

In the press release, Daniels lauded the state’s revenue department for increasing the efficiency of the tax return processing, which has increased the amounts that will be returned to counties.

Estimated tax revenues

The following are the approximate amounts that municipalities and county government are projected to get in 2006 from the County Economic Development Income Tax, based on the amounts that have been certified by the state.

This year’s certified totals for comparison are shown in parentheses.

County: $3,519,919 ($3,036,210)

Chesterton: $599,314 ($519,288)

Porter: $285,307 ($246,177)

Burns Harbor: $43,893 ($37,927)

Dune Acres: $11,817 ($10,546)

Valparaiso: $1,570,035 ($1,358,031)

Portage: $1,924,560 ($1,658,473)

Beverly Shores: $40,517 ($35,055)

Hebron: $202,585 ($178,047)

Kouts: $97,072 ($84,072)

Ogden Dunes: $75,125 ($65,010)

Pines: $45,581 ($39,511)

 

 

 

Posted 9/7/2005