Brazil, IACT, look at tax alternatives

Thursday, December 15, 2005

Representatives of the Indiana Association of Cities and Towns addressed city officials from across the state in Indianapolis on Wednesday, part of its push for legislation which would give municipalities the tools to stabilize property taxes.

The "Hometown Matters" plan, first unveiled by the IACT in mid-November, would reduce Indiana's dependency on property taxes by enabling municipalities to implement supplemental taxes. A portion of the revenue generated by the alternative taxes would be placed in a rainy day "tax stabilization fund," to be used in the event of future budget shortages.

The informational session was one of a series of presentations IACT is conducting around the state.

IACT Government Affairs Officers Ann Cottongim and Matt Brase have taken Hometown Matters on the road this week, expounding upon the merits of the proposal in Ft. Wayne, Maryville and Indianapolis. They'll hit Jasper today.

"We've been all over the state, talking to anybody that will listen to us," Brase said.

Hometown Matters gives local governments four alternatives to the property tax, including a local sales tax, a supplemental income tax, an innkeepers' tax and a food and beverage tax. Over time, revenues generated by the supplemental taxes would reduce municipalities' reliance on property taxes.

Mayor Tom Arthur said a local sales tax would be best suited to Brazil.

"There's not a lot of inns in Brazil, and a food and beverage (tax) targets one particular industry," he said. "The sales tax is a user tax. It's fair-- the more you spend, the more you pay."

IACT defines the Hometown Matters plan as a way to gradually shift taxes, as opposed to a standard tax increase. But according to Indiana District 46 Representative Vern Tincher (D-Riley), Hoosiers would likely pay more in the early stages of the plan.

Tincher said it will be difficult to pass the bill into law during the upcoming legislative session. In an election year, he said, some congressmen would hesitate to support a bill which, on the surface, looks like any other tax hike.

"Constituents will see it as the legislature raising taxes, rather than (giving the option to) local governments," he said. "Usually it takes several sessions for a proposal of this magnitude to pass."

The Hometown Matters proposal has not yet been drafted as a bill, but Tincher said "they're probably lining up three or four authors."

IACT has yet to name a sponsor for a Hometown Matters bill, and Cottongim declined to comment on the organization's effort to solicit legislative sponsorship. However, the governor has been receptive to the plan, though he has some concerns, Brase said. IACT has met several times with Gov. Mitch Daniels and his economic experts.

Despite the challenges confronting the proposal, Cottongim said the IACT has made significant headway with the Hometown Matters plan.

"We're taking a very proactive approach," she said. "The re-election year will pose some challenges, but we feel pretty good about where we are today."

Editor Frank Phillips contributed to this report.

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