A group of Indiana University graduate students spent last semester studying Brown County’s tax structure and other variables. Their goal was to help county leaders develop tools to forecast how changes in taxes, spending and the county’s economy will affect taxpayers and local government — a “county financial and decision support model.”
Local government is funded mainly by a mixture of property taxes and income taxes.
Since 2012, Brown County has been getting more of its revenue from income taxes, to the point where they’re almost equally as important as property taxes, the students’ study said. The Brown County Council voted to freeze property taxes starting in 2014, so any needed increases that weren’t from the creation of new government units or new debt had to come from income taxes.
That shift has led to questions about how the county’s tax structure affects residents and businesses. For instance, does levying higher income taxes while keeping property taxes low encourage people to both live and work here, or just one or the other — and why might that matter?
Understanding the relationships among those factors is important to Brown County’s economic future, the students’ study said.
“The average increase in levy and budget indicate increasing tax burden on a diminishing tax base,” the study said. “Based on these calculations, Brown County’s needs are out-pacing its ability to levy property taxes.”
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Brown County’s property tax rate is one of the lowest in the state, yet its income tax rate is the seventh-highest.
Projections from STATS Indiana show Brown County losing residents through 2050, taking the population down to an estimated 12,785.
When figuring how much income tax to withhold from a person’s paycheck, the state uses the rate for the county in which a person lives, according to the Indiana Department of Revenue. All surrounding counties have lower income tax rates than Brown County’s except for Morgan County — which could give a person incentive to live in one of those other counties.
However, all of those surrounding counties charge a higher median property tax rate than Brown County does, according to the STATS Indiana database. That might give a person an incentive to buy property in Brown County.
The median cost of purchasing a home in Brown County, though, is $10,000 to $30,000 more than in Bartholomew, Johnson and Morgan counties, according to data from regional real estate group MIBOR. MIBOR does not track home sales in Monroe or Jackson counties.
The complex relationship among taxes, property value, the population, personal income and the county’s budget is one that county leaders should study further, the IU students concluded. They submitted a 42-page report to the Brown County Redevelopment Commission — a group of appointed volunteers — about what the county would need in order to accurately study that concept and project different scenarios, so they could see the possible impact of policy changes, like raising certain kinds of taxes, before they make them.
To do that analysis, county leaders would need easy access to data in user-friendly formats, and software that would make organizing and analyzing it simpler, the students said. Forming a partnership with other IU departments to help with these tasks — for other rural counties as well, not just Brown County — was mentioned at their report to the community on May 18.
No elected officials attended that Friday-night presentation.
When the Brown County Council voted in 2013 to “freeze” property taxes at their current levy, one of the reasons was so they would not overburden property owners — like those on fixed incomes — who can’t afford increases. Instead, the county is allowed to raise income taxes each year by a certain percentage, which is usually calculated in August. The county council needs to decide yet this year if they’re going to raise income taxes or if they’re going to cut budget requests by as much as $250,000.
Even though Brown County is under a property tax “freeze,” it can be “thawed” if the county ever goes to the maximum income tax rate, Brown County Auditor Beth Mulry said at the June council meeting.
