Income Tax Rates in Indiana Counties – How Does Monroe County Compare?

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.



Indianapolis-Marion County Considers Eliminating the Homestead Credit. Should we?

Fish Atop the Monroe County Courthouse

Today’s Indianapolis Star has a longish article on Mayor Ballard’s budget proposal for 2013:

In particular, what caught my eye was the mayor’s proposal to save $8.1 million by eliminating the homestead credit:

“The remaining money to close next year’s deficit would come from ending the homestead tax credit.

Doing away with it is estimated to save $8.1 million. That credit is different from the far more lucrative homestead deduction, which wouldn’t be touched.”

The homestead credit is a portion of local income taxes (County Option Income Taxes) that are held back and used to reduce the property taxes of homeowners. It is a local option to have the homestead credit, and not all counties have one. This is entirely different, as the article points out, from the homestead deduction, which substantially reduces the assessed value of owner-occupied properties.

In Monroe County, the homestead credit cost local units of government $1,346,093 (and conversely the credit saved local homeowners the same amount). The 2012 COIT Distribution Report for Monroe County from the Indiana Department of Local Government Finance (DLGF) shows this credit at the upper right-hand corner of the report.

In the past I have suggested that we may want to consider eliminating or phasing out this credit, should the budget situation become dire. Fortunately although budgets for local government are still stressed, we have not faced the likelihood of large-scale cuts in essential services. However, should this become a possibility, the homestead credit is one option that local government has to raise a bit of revenue. Of course, this would be perceived as a tax increase (from the taxpayer’s perspective, elimination of a credit is the same as an increase).

Surprisingly, although the homestead credit is a county-wide tax credit, it is actually up to the Bloomington City Council to modify or rescind the homestead credit. That is because the Indiana Code chapter that defines the homestead credit (IC 6-3.5-6-3) gives the responsibility for setting income tax rates and credits to the County Income Tax Council, which consists of the fiscal bodies of the county and all cities and towns inside the county (this means the County Council, the Bloomington City Council, and the Ellettsville and Stinesville Town Councils).

However, it assigns votes in the County Income Tax Council proportionally to the population in each of the areas represented by the fiscal bodies — in other words, the Bloomington City Council gets votes in proportion to the percentage of Monroe County’s population that is within the Bloomington city limits, the Ellettsville Town Council within the Ellettsville town limits, and the County Council the remaining votes (the population that is outside of the incorporated areas). Stinesville doesn’t have enough population to receive any votes. But in any case, the Bloomington City Council actually has a majority of the votes (greater than the share of the County and Ellettsville combined) — so essentially the City Council has complete say over the county income tax rates and any homestead credit.