As I have mentioned in previous postings, Monroe County is considering raising its income tax rate to support juvenile services from 0.05% to 0.095%. Several constituents have asked me how Monroe County’s income tax rate compares to other counties in Indiana.
First of all, there are six different types of local option income taxes available to all Indiana counties, in various combinations. They are:
- County Option Income Tax (COIT) — Monroe County uses this, at a 1% rate
- County Adjusted Gross Income Tax (CAGIT)
- County Economic Development Income Tax (CEDIT)
- Local Option Income Tax (LOIT) to freeze property tax growth
- Local Option Income Tax (LOIT) to replace property taxes
- Local Option Income Tax (LOIT) to support public safety
In addition, there are several special income taxes that are available through legislation specific to individual counties. Monroe County has one of these special income tax rates available for juvenile services (the so-called Juvenile COIT). We are authorized to raise the rate up to a maximum of 0.25%. The rate is currently 0.05%, and the County Council is considering raising it to 0.095%. If this passes, Monroe County’s total income tax rate would be 1.095%, up from 1.05%.
The other thing to remember about income taxes is that taxpayers pay income tax based on where they live, not where they work. So a Greene County resident who works in Monroe County, for example, would pay to Greene County an income tax rate of 1% (i.e., Monroe County would receive nothing). Incidentally, although not the topic of this posting, this system puts “employment center” counties (like Monroe, Tippecanoe, Marion, etc.) at a disadvantage relative to their neighbor counties.
So how does Monroe County’s total income tax rate stack up against other Indiana counties? The following table lists all of the counties in Indiana, along with their total income tax rate (combining all of the income taxes that the county has adopted) and their rank in the state, where 1 represents the highest tax rate and 92 the lowest. For the purposes of this analysis, I used 1.095% for Monroe County (i.e., how we would compare IF we adopted the higher tax rate).
County | Income Tax Rate | Rank |
Pulaski County | 3.130 | 1 |
Jasper County | 2.964 | 2 |
Wabash County | 2.900 | 3 |
Morgan County | 2.720 | 4 |
Miami County | 2.540 | 5 |
Cass County | 2.500 | 6 |
Jay County | 2.450 | 7 |
Fayette County | 2.370 | 8 |
Parke County | 2.300 | 9 |
Clay County | 2.250 | 10 |
Grant County | 2.250 | 10 |
Brown County | 2.200 | 12 |
Warren County | 2.120 | 13 |
Montgomery County | 2.100 | 14 |
Wells County | 2.100 | 14 |
Clark County | 2.000 | 16 |
Clinton County | 2.000 | 16 |
Washington County | 2.000 | 16 |
Fulton County | 1.930 | 19 |
Benton County | 1.790 | 20 |
Steuben County | 1.790 | 20 |
Daviess County | 1.750 | 22 |
Huntington County | 1.750 | 22 |
Lawrence County | 1.750 | 22 |
Madison County | 1.750 | 22 |
St. Joseph County | 1.750 | 22 |
Starke County | 1.710 | 27 |
Carroll County | 1.704 | 28 |
Hancock County | 1.650 | 29 |
Marion County | 1.620 | 30 |
Howard County | 1.600 | 31 |
Jackson County | 1.600 | 31 |
Tipton County | 1.580 | 33 |
Perry County | 1.560 | 34 |
DeKalb County | 1.500 | 35 |
Elkhart County | 1.500 | 35 |
Lake County | 1.500 | 35 |
Martin County | 1.500 | 35 |
Noble County | 1.500 | 35 |
Putnam County | 1.500 | 35 |
Randolph County | 1.500 | 35 |
Rush County | 1.500 | 35 |
Union County | 1.500 | 35 |
Wayne County | 1.500 | 35 |
Scott County | 1.410 | 45 |
Hendricks County | 1.400 | 46 |
LaGrange County | 1.400 | 46 |
Ripley County | 1.380 | 48 |
Blackford County | 1.360 | 49 |
Allen County | 1.350 | 50 |
Decatur County | 1.330 | 51 |
White County | 1.320 | 52 |
Owen County | 1.300 | 53 |
Bartholomew County | 1.250 | 54 |
Franklin County | 1.250 | 54 |
Henry County | 1.250 | 54 |
Jennings County | 1.250 | 54 |
Marshall County | 1.250 | 54 |
Orange County | 1.250 | 54 |
Shelby County | 1.250 | 54 |
Vigo County | 1.250 | 54 |
Whitley County | 1.233 | 62 |
Floyd County | 1.150 | 63 |
Adams County | 1.124 | 64 |
Fountain County | 1.100 | 65 |
Knox County | 1.100 | 65 |
Tippecanoe County | 1.100 | 65 |
Monroe County (*) | 1.095 | 68 |
Delaware County | 1.050 | 69 |
Boone County | 1.000 | 70 |
Crawford County | 1.000 | 70 |
Dubois County | 1.000 | 70 |
Greene County | 1.000 | 70 |
Hamilton County | 1.000 | 70 |
Harrison County | 1.000 | 70 |
Johnson County | 1.000 | 70 |
Kosciusko County | 1.000 | 70 |
Newton County | 1.000 | 70 |
Ohio County | 1.000 | 70 |
Posey County | 1.000 | 70 |
Switzerland County | 1.000 | 70 |
Vanderburgh County | 1.000 | 70 |
LaPorte County | 0.950 | 83 |
Spencer County | 0.800 | 84 |
Dearborn County | 0.600 | 85 |
Gibson County | 0.500 | 86 |
Porter County | 0.500 | 86 |
Warrick County | 0.500 | 86 |
Pike County | 0.400 | 89 |
Jefferson County | 0.350 | 90 |
Sullivan County | 0.300 | 91 |
Vermillion County | 0.200 | 92 |
Pulaski County has the highest income tax rate in the state, at 3.13%, while Vermillion County, at 0.2% has the lowest. Monroe County’s rank is 68th.
So we are in the lower third of counties in Indiana for income tax rates. How do we compare to our neighbor and peer counties, though?
The following chart shows the 2014 income tax rates and rankings among Monroe County and its contiguous neighbors:
Monroe County has the second lowest income tax rate of its neighbor counties.
Now how about our peer counties? Peer counties are counties that are generally similar to Monroe County in size and demographics (i.e., college towns, rural-urban breakdown, etc.). These counties are typically used in policy comparisons.
The following chart shows the 2014 income tax rates and rankings for Monroe County along with its peer counties.
If the proposed juvenile tax increase passes, we will be third-lowest of our peer counties. Currently we are actually tied with Delaware for second-lowest.
The final comment to make about local income taxes is that unlike property taxes, there is no guarantee that, despite the rates, the amount of tax actually collected will grow or remain stable over time. The amount of tax revenue for local governments is directly tied to the amount of income actually earned by county residents. and thus the overall economic development of the county.
Geoff,
This was very informative.
I always wondered why certain counties did not struggle to pay for basic services, while others were always struggling. This makes a lot of sense.