Since 2011, taxpayers in Jackson County have paid a special local income tax rate of 0.1 percent, which has generated $1.1 million, even though the law no longer authorized it.
Since 2006, taxpayers in Pulaski County have paid a similar unauthorized tax rate of 0.3 percent and collectively have paid $4.9 million in additional taxes.
Rep. Eric Turner, R-Cicero, said he supports overriding the governor’s veto of tax legislation. Photo by Lesley Weidenbener, TheStatehouseFile.com |
The tax revenue paid for jail operating costs in both counties.
Rep. Jim Lucas, R-Seymour, said Jackson County officials did not seek renewal of the 0.1 percent tax rate and the state failed to notice the mistake.
“They’re humans just like us, but it’s how we handle those mistakes and correct them,” Lucas said. “Nobody tried to do anything that was sneaky. People owned up to it, and we presented a common sense solution.”
But Pence vetoed that solution in May and said last year’s tax collections should be refunded to taxpayers.
Pence said Hoosiers deserve relief when they pay taxes that are not owed.
The governor issued a letter to legislators on Monday asking them to sustain his veto.
“While HEA 1546 contained many provisions that I support, I could not support the public policy of retroactive approval of local income taxes,” Pence said. “I believe taxpayers should have full and fair notice of any proposed tax and have an opportunity to make their voices heard at both the state and local levels.”
Lucas said as a conservative Republican, he shares the governor’s concern, but he will do “everything I can to see that this bill becomes a law.”
“This isn’t just some tax that came up over night,” Lucas said. “It’s very targeted and very useful.”
Lucas said the bill has received “unanimous bipartisan support from all leaders in Jackson County.”
This 0.1 percent income tax rate generated approximately $700,000 for the county last year.
Lucas said if the bill does not receive the necessary votes to override Pence’s veto, Jackson County will have to determine a different funding mechanism.
Jackson County had planned to renew its tax authority through 2020.
He said this bill was an “easy fix” to continue funding the jail.
Pulaski County Councilman Jay Sullivan said the county officials support overriding the governor’s veto to continue making payments for Pulaski County’s jail bond.
He said the county would have to borrow money to pay the taxpayers if it needed to refund the money.
The county has collected money for maintenance to the county courthouse and prosecutor’s office. But Sullivan said those projects could not be completed if the county used that money to refund taxpayers.
Legislators can override the vetoes with simple majority votes at Wednesday’s technical corrections day, in November for Organization Day or during next year’s legislative session. But lawmakers have not met for a technical session since 1995.
However, Rep. Eric Turner, a Republican from Cicero who authored the bill, said using the technical corrections day was the “best solution” to pass his bill.
“My objective is to override the veto and move on,” Turner said. “But I suspect we’ll have a handful of no votes.”
Turner originally authored HB 1546 without the provisions regarding the income taxes in Jackson and Pulaski counties. His bill included provisions pushed by the Department of Revenue.
Lucas authored a separate bill that focused on Jackson County.
After the Department of Revenue found that Pulaski County was in an almost identical situation as Jackson County, the Turner and Lucas bills were combined.
In addition to the provisions regarding Jackson and Pulaski counties, the final bill makes retailers using sales tax suppression devices, or zappers, a felony. The devices falsify the records of POS systems for tax evasion.
“The other provisions of the bill are equally important,” Turner said. “I’d hate to lose the whole bill.”
Article writer Ellie Price is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.
Governor asks members of Indiana General Assembly to sustain veto of HEA 1546
INDIANAPOLIS – Gov. Mike Pence is asking members of the Indiana General Assembly to sustain his veto of HEA 1546, regarding tax administration.
Legislators plan to return to the Statehouse on Wednesday to consider the veto of HEA 1546.
Gov. Pence issued a letter Monday (June 10) on the matter to all members of the General Assembly. The letter can be read in full as follows:
Dear Members of the Indiana General Assembly,
If Hoosiers owe taxes, they should pay them. But when Hoosiers pay taxes that are not owed, they deserve relief. House Enrolled Act 1546-2013 did not meet that standard. It would approve, after the fact, the collection of taxes that were not owed. While there are valuable elements of this legislation, retroactive approval of taxes collected is not the best remedy, and for that reason I vetoed this legislation.
Since mid-2011, all taxpayers in Jackson County have paid a special local income tax rate of 0.1% that was no longer authorized by law. Likewise, since mid-2006, all taxpayers in Pulaski County have a paid a similar unauthorized rate of 0.3%. This means 30,400 taxpayers in Jackson County collectively paid $1.1 million and 12,400 taxpayers in Pulaski County collectively paid $4.9 million above and beyond what they owed in taxes. The tax revenue paid for jail operating costs, not debt, in both counties.
House Enrolled Act 1546-2013 “legalized and validated” these overpayments. While HEA 1546-2013 contained many provisions that I support, I could not support the public policy of retroactive approval of local income taxes. For that reason, I vetoed the bill. I believe taxpayers should have full and fair notice of any proposed tax and have an opportunity to make their voices heard during the legislative process at both the state and local levels.
At the same time I remain committed to finding a solution to a problem that neither the state nor the counties intended. Four basic steps will set things right: (1) stop distributing money from the illegal tax to the two counties; (2) stop collecting the illegal tax; (3) refund taxpayers who overpaid; and (4) gradually repay over-distributions from the two counties.
Starting last week, the Budget Agency stopped authorizing distribution of the illegal tax to Jackson and Pulaski counties. This reduced Jackson County’s local option income tax by $29,484 for the month and reduced Pulaski County’s local option income tax distribution by $69,166 for the month.
Beginning soon, the Department of Revenue will work with employers in Jackson County and Pulaski County to make appropriate reductions to payroll withholdings.
Employee paychecks will no longer be reduced to fund the unauthorized tax. The Department of Revenue has also identified the taxpayers due refunds and is prepared to issue refunds directly to them. For those taxpayers who cannot be located, their refunds will be transferred to the Indiana Attorney General’s Unclaimed Property Division.
As for county repayment of over-distributions, the State Budget Agency will, beginning in January 2014, make additional adjustments to Jackson County’s and Pulaski County’s local income tax distributions. It is possible to hold those distributions constant for a few years as the two counties forgo annual increases. The forgone increases, in turn, will be credited as repayments of the over-distributions the two counties received in the past. Under this scenario, Jackson County will repay the state $1.1 million by 2018 and Pulaski County will repay the state $4.9 million by 2024.
Both Jackson and Pulaski County report healthy cash balances in their accounts. At the end of 2012, Jackson County had a total cash balance of $5.21M in its general fund and rainy day fund, while Pulaski County reported $4.67M in the same funds with additional $2.01M in cash in its jail operating fund. These healthy balances will help the counties weather any short-term adjustments to the jail operating income tax until the next session of the Indiana General Assembly, and also weather any impact during the repayment period. Furthermore, allowing the counties to pay back the state by reducing their overall income tax distribution will allow the counties to determine how to allocate the impact of the repayment across their different funds. In addition, because the tax rates at issue were limited to jail operating expenses, no debt or municipal bonds were involved or will be affected.
Finally, this proposed solution will avoid the uncertainty of state or local government liability for collection of an illegal tax. Prompt cessation of the unauthorized tax and timely refunds to taxpayers will prevent needless risk of lawsuits and a judicially imposed solution. This is our chance to make it right and do so in the most efficient and expeditious way possible.
Our country was founded on the precept of taxation with representation and government by consent of the governed. We should take the course that will maintain public confidence in the integrity of our system of taxation, a system that should ensure the people know and help determine how much of their hard-earned pay is taxed for the benefit of their communities. I respectfully request that you join me in putting these principles and the taxpayers of Jackson and Pulaski counties first and sustain the veto of House Enrolled Act 1546-2013.
