The tax season is just around the corner. This year, federal income taxes are due on May 17th. Indiana state and local income taxes are due April 15th. The first installment of property tax is due on May 10th. You pay your vehicle excise tax every year with your vehicle registration. The due dates are based on alphabetical order. My last name gives me a due date for April 7th. And of course sales taxes and fuel taxes are not in season.
The debates over federal spending and the state budget are in the news, so we have an idea of where those taxes are going. But what about the local governments? Property taxes, income taxes, sales taxes, fuel taxes, and vehicle excise taxes also fund local government. Here is how.
Property taxes are levied on land, buildings and office equipment. After the deduction of the loans, taxes of $ 6.8 billion were levied in 2020 for counties, municipalities, cities, schools and libraries, as well as for special districts such as fire protection or transportation. School districts receive the largest portion of property taxes, more than $ 3 billion. Counties, cities and towns receive most of the rest.
All Indiana counties now have local income taxes. They’re collected with state income taxes by the Indiana Treasury Department and then redistributed to counties based on how much the county’s residents have paid. These dollars are divided among the local governments in each county using several formulas based primarily on property tax. The state distributed $ 2.8 billion in 2020, with counties, cities, and towns making up the largest share. School districts get little.
The property tax that applied to your house used to apply to your car as well. A constitutional amendment 50 years ago made it possible for the legislature to replace these property taxes with the vehicle consumption tax on cars, light commercial vehicles and motorcycles. Because of this, the revenue is distributed to all local governments and used for general purposes, not just roads. The state is also involved. Local governments received nearly $ 600 million in vehicle excise taxes in 2019.
Taxes on fuel pay for building and maintaining roads. The state levies taxes on the sale of gasoline and other fuels and charges on electric vehicles. The State Department of Transportation receives just over 60% of the total cost, and the remainder is distributed to the county, town, and town highway and road departments to maintain the local roads. The distribution formula is complicated – much more complicated – but it is based on kilometers of road, vehicle registrations and population. This way, counties without many gas stations still get money to keep their roads in shape. Local governments received around $ 600 million in state highway aid in 2020.
Most of the local income – slightly larger than property taxes – is state school allowances. More than 40% of the state’s general fund budget is earmarked for income for local school districts. Again, it’s a complicated formula based on school enrollment and various demographic factors. State sales and income taxes bring in more than 80% of the money for the state general fund. About a third of the sales and income taxes you pay go to local schools. State school aid was $ 6.9 billion in fiscal 2020.
All of these sources account for 85% of local revenue. The rest comes from fees, charges, licenses and fines, as well as from a variety of different sources, such as B. Restaurant and hotel taxes, beverage tax distributions, interest income, property sales and much more. Fees, fines, and fees were $ 1.4 billion in 2020, everything else was around $ 1.6 billion.
Overall, the local government in Indiana costs about $ 21 billion to run. School districts make up 55% of this amount – children are expensive! Towns and municipalities account for 18% and rural districts for 14%. The remaining 13% are townships, library districts, and special districts.
I’d rather not pay taxes. You’d rather not pay taxes. But schools, streets, cops, firefighters, parks, and libraries are practical, and taxes are their price.
Larry DeBoer is an agricultural economist at Purdue University. His column appears in Indiana newspapers.