logo
SB 1 cut property taxes. But will local governments hike income taxes? How much you could pay

SB 1 cut property taxes. But will local governments hike income taxes? How much you could pay

AI-assisted summary
Indiana's SEA 1 will provide property tax relief to homeowners and businesses, with businesses receiving the largest cuts.
Local governments can offset property tax revenue by increasing income taxes. That could mean some families pay over $1,000 more per year on income taxes.
Cities across Indiana are evaluating the impact of SB 1 and considering measures like hiring freezes and delays to infrastructure projects.
In northern Indiana, the Democratic mayor of South Bend called Senate Bill 1 a " sweeping anti-growth policy" that sabotages local governments.
In southern Indiana, the Republican mayor of Jeffersonville responded with cost-cutting measures including a hiring freeze on all but "essential and critical" roles and tighter restrictions on overtime and work-related travel.
And in Central Indiana, Noblesville's Republican mayor is contemplating new income taxes and delays to major infrastructure projects as he expects his city to miss out on tens of millions in property tax revenue over the next few years.
Much remains unclear as municipal leaders reckon with how much property tax revenue they stand to miss out on from the 345-page SB 1, an overhaul of local government finance signed into law by Indiana Gov. Mike Braun April 15. Tax revenues will still increase as property values keep rising, but by far less than local leaders had expected under the current system.
With lost revenues statewide at an estimated $1.4 billion from 2026 to 2028, local leaders say that years of belt-tightening will entail tough decisions about how to maintain crucial services like road maintenance, public education and emergency response systems.
Multiple experts say they expect most communities to increase income taxes come 2027, which could completely offset the property tax savings for the typical Indiana homeowner and wring out more money with no relief from the nearly 30% of Hoosiers who rent.
Many communities could tax a Hoosier family with an income near the median $80,000 over $1,000 more per year, according to Michael Hicks, a Ball State University economist who leads the university's Center for Business and Economic Research.
"The income tax increases are delayed a year, so we will have a year of tax cuts and service cuts before we start seeing schools, counties and cities scrambling to plug budget holes," Hicks told IndyStar.
The tax cuts, he added, "take an awful lot out of local government and expose an awful lot of taxpayers to potentially paying a much higher income tax."
How the new law helps homeowners, businesses
The new law will save most homeowners some money, mainly through tax credits of 10% on their property tax bill, with a $300 max credit. Wealthier homeowners will receive the full $300 while most homeowners whose assessed value falls below $300,000 will save less, aside from added relief for seniors, veterans and people with disabilities.
Republicans say they expect two-thirds of homeowners to pay a lower property tax bill in 2026 than they will this year.
Businesses will receive the most tax relief as the minimum threshold for filing taxes on business equipment, such as computers and machinery, rises from $80,000 to $2 million by 2027, meaning most Indiana businesses won't pay any property tax, according to Hicks. Cuts to taxes on depreciating business equipment bought after Jan. 1 will also drain money from local coffers over the next decade, Hicks said.
Crucially, the bill allows cities and towns to make up for lost revenue by imposing income taxes, which are currently applied at the county level. Most homeowners are likely to see their property tax savings offset by higher income taxes levied by local governments desperate to shore up their budgets, multiple public policy experts told IndyStar.
The governor and Republican legislators tout that the law will reduce the local income tax cap in each county from 3.75% to 2.9%.
Because most counties already impose a rate well below 2.9%, however, the new law is still likely to increase the income tax that most people pay, said Paul Helmke, a former three-term Republican mayor of Fort Wayne who now teaches public policy at Indiana University.
Under the current system in which local governments rely heavily on property taxes, only seven of the state's 92 counties have local income tax rates over 2.8%. Marion County's levy, for instance, is 2.02%, while Hamilton County's rate is 1.1%.
Dwindling property tax revenues will strain local leaders' ability to deliver high-quality services like a robust police department or well-maintained parks without somehow scraping together more revenue, Helmke said.
It's possible that local governments won't take the political risk of setting tax rates near the 2.9% cap, Helmke said, but the corresponding quality-of-life reductions could prove even more unpopular.
"For the elected officials, the challenge is going to be how to provide first-class services that people expect with these property tax changes," Helmke said. "For the city and the county, I think it means you're going to have to hike the income tax."
If local units in Hamilton County were to increase income taxes to the maximum rate, that would mean someone with a median county household income of just under $118,000 could pay an additional $1,800 in income taxes per year. Even just bumping the rate up to 1.4% — well beneath the limit allowed under law — would offset the max savings from the property tax credit.
"Since the (SB 1) tax cuts are the broadest and largest business tax cuts in state history," Hicks said, "most local governments will need to maximize most of that income tax."
Justin Ross, an IU economist specializing in state and local tax policy, said he would be surprised if most local governments don't tax near the maximum 2.9% rate in the next couple of years.
Otherwise, they sacrifice amenities like ample parks, strong schools and robust police and fire departments that give cities and towns the edge in the competition for new residents.
"Local governments, for good or for bad, are the closest to being like a business," Ross said. "Their property taxes are largely tied to their ability to make the place a desirable place to be."
Republican legislators aim to increase transparency by requiring local governments, starting in 2031, to vote annually on the income tax rates. Tax levies will no longer continue indefinitely but will be discussed and voted on during standalone public hearings.
"If local units of government choose to raise other taxes, like a local income tax," State Sen. Chris Garten, R-Charlestown, said in a statement, "those units will have to justify to their taxpayers why they need more hard-earned taxpayer money instead of first looking to make their operations more efficient."
How local governments are reacting so far
A consequence of local governments' shift from depending less on property taxes and more on income taxes will be greater difficulty forecasting revenues and planning long-term capital improvements, Accelerate Indiana Municipalities CEO Matt Greller told IndyStar.
"Property tax is very stable. You know what you're going to get for the most part. Every year, it doesn't fluctuate a whole lot," Greller said. "Income taxes can fluctuate a lot more."
Under the new property tax law, Marion County is forecast to miss out on roughly $77 million in property taxes from 2026 to 2028 while Hamilton County forgoes $133 million, according to a state fiscal report.
In Marion County and statewide, schools are poised to face the largest losses.
In 2024, nearly half of the roughly $1.6 billion in property taxes collected in Marion County went to schools. The consolidated city-county government of Indianapolis and Marion County received a third of the taxes, about $513 million, that year. Smaller disbursements went to township trustees' offices, libraries, hospitals and public transit.
Many local officials told IndyStar that the complexity of Indiana's property tax system means the looming changes are uncertain and require further analysis. But as towns and cities begin forming their 2026 budgets this summer, officials will act in anticipation of the millions of tax dollars they expect to miss out on in the coming years.
"The way we fund local government is shifting pretty significantly," Greller said, "and there's going to be a whole lot of nuances in order to figure out what it looks like now."
Officials with the Indianapolis mayor's office and the Marion County assessor's office declined interviews on how the bill may reduce services in the state's largest city. The same was true of leaders in Carmel and Westfield. All said they are still analyzing how the bill will affect their cities.
Noblesville Mayor Chris Jensen said extensive internal analyses show his city could receive about $36.5 million less than projected over the next four years. Those numbers far exceed Legislative Services Agency estimates — about $21 million for the city and school system combined — because the city is taking more factors into account than merely the tax credits, Jensen said.
With healthy cash reserves, the city is likely to manage the losses by pulling back on plans to boost its already "very lean" staffing levels, Jensen said. The lost revenue will also probably delay some of the 284 capital projects in Noblesville's 10-year plan. The mayor wasn't specific on which projects could be delayed, but Noblesville lists a number of road projects, such as improvements to State Road 37 and 38, as under design on its website.
"Even though we won't probably see the fiscal impact for another eight or so months until we get to 2026," Jensen said, "we'll certainly be budgeting based on those fiscal impacts here in the next 90 days."
Deb Whitfield, the Democratic mayor of Lawrence, said the law may benefit homeowners but places intense strain on local governments.
Lawrence city government could lose more than $1.2 million from 2026-2028, while the Lawrence school district stands to miss out on nearly $2.7 million. Starting this budget season, Whitfield said, she's intent on figuring out how to maintain high-quality public safety, schools and libraries with less money.
Whitfield said that for her and her fellow mayors, there are "going to be a lot of sleepless nights coming."

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trump aides want Texas to redraw its congressional maps to boost the GOP. What would that mean?
Trump aides want Texas to redraw its congressional maps to boost the GOP. What would that mean?

Yahoo

time11 minutes ago

  • Yahoo

Trump aides want Texas to redraw its congressional maps to boost the GOP. What would that mean?

This coverage is made possible through Votebeat, a nonpartisan news organization covering local election administration and voting access. Sign up for Votebeat Texas' free newsletters here. Republicans representing Texas in Congress are considering this week whether to push their state Legislature to take the unusual step of redrawing district lines to shore up the GOP's advantage in the U.S. House. But the contours of the plan, including whether Gov. Greg Abbott would call a special session of the Legislature to redraw the maps, remain largely uncertain. The idea is being driven by President Donald Trump's political advisers, who want to draw up new maps that would give Republicans a better chance to flip seats currently held by Democrats, according to two GOP congressional aides familiar with the matter. That proposal, which would involve shifting GOP voters from safely red districts into neighboring blue ones, is aimed at safeguarding Republicans' thin majority in Congress, where they control the lower chamber, 220-212. The redistricting proposal, and the Trump team's role in pushing it, was first reported by The New York Times Monday. Without a Republican majority in Congress, Trump's legislative agenda would likely stall, and the president could face investigations from newly empowered Democratic committee chairs intent on scrutinizing the White House. Here's what we know about the plan so far: On Capitol Hill, members of the Texas GOP delegation huddled Monday night to discuss the prospect of reshaping their districts. Most of the 25-member group expressed reluctance about the idea, citing concerns about jeopardizing their districts in next year's midterms if the new maps overextended the GOP's advantage, according to the two GOP aides, who spoke on the condition of anonymity to discuss the private deliberations. Rep. Jodey Arrington, R-Lubbock, was skeptical of the idea. 'We just recently worked on the new maps,' Arrington told The Texas Tribune. To reopen the process, he said, 'there'd have to be a significant benefit to our state.' The delegation has yet to be presented with mockups of new maps, two aides said. Each state's political maps must be redrawn once a decade, after each round of the U.S. census, to account for population growth and ensure every congressional and legislative district has roughly the same number of people. Texas lawmakers last overhauled their district lines in 2021. There's no federal law that prohibits states from redrawing district maps midcycle, said Justin Levitt, an election law professor at Loyola Marymount University and a former deputy assistant attorney general in the Department of Justice's civil rights division. Laws around the timing to redraw congressional and state district maps vary by state. In Texas, the state constitution doesn't specify timing, so the redrawing of maps is left to the discretion of the governor and the Legislature. Lawmakers gaveled out of their 140-day regular session last week, meaning they would need to be called back for a special session to change the state's political maps. Abbott has the sole authority to order overtime sessions and decide what lawmakers are allowed to consider. A trial is underway in El Paso in a long-running challenge to the state legislative and congressional district maps Texas drew after the 2020 U.S. Census. If Texas redraws its congressional maps, state officials would then ask the court to toss the claims challenging those districts 'that no longer exist,' Levitt said. The portion of the case over the state legislative district maps would continue. If the judge agrees, then both parties would have to file new legal claims for the updated maps. It isn't clear how much maps could change, but voters could find themselves in new districts, and Levitt said redrawing the lines in the middle of the redistricting cycle is a bad idea. 'If the people of Texas think that their representatives have done a bad job, then when the [district] lines change, they're not voting on those representatives anymore,' Levitt said. 'New people are voting on those representatives.' The National Democratic Redistricting Committee, Democrats' national arm for contesting state GOP mapmaking, said the proposal to expand Republicans' stronghold in Texas was 'yet another example of Trump trying to suppress votes in order to hold onto power.' 'Texas's congressional map is already being sued for violating the Voting Rights Act because it diminishes the voting power of the state's fast-growing Latino population,' John Bisognano, president of the NDRC said. 'To draw an even more extreme gerrymander would only assure that the barrage of legal challenges against Texas will continue.' When Republicans in charge of the Legislature redrew the district lines after the 2020 census, they focused on reinforcing their political support in districts already controlled by the GOP. This redistricting proposal would likely take a different approach. As things stand, Republicans hold 25 of the state's 38 congressional seats. Democrats hold 12 seats and are expected to regain control of Texas' one vacant seat in a special election this fall. Most of Texas' GOP-controlled districts lean heavily Republican: In last year's election, 24 of those 25 seats were carried by a Republican victor who received at least 60% of the vote or ran unopposed. The exception was U.S. Rep. Monica De La Cruz, R-Edinburg, who captured 57% of the vote and won by a comfortable 14-point margin. With little competition to speak of, The Times reported, Trump's political advisers believe at least some of those districts could bear the loss of GOP voters who would be reshuffled into neighboring, Democratic-held districts — giving Republican hopefuls a better chance to flip those seats from blue to red. The party in control of the White House frequently loses seats during midterm cycles, and Trump's team is likely looking to offset potential GOP losses in other states and improve the odds of holding on to a narrow House majority. Incumbent Republicans, though, don't love the idea of sacrificing a comfortable race in a safe district for the possibility of picking up a few seats, according to GOP aides. In 2003, after Texas Republicans initially left it up to the courts to draw new lines following the 2000 census, then-U.S. House Majority Leader Tom DeLay, a Sugar Land Republican, embarked instead on a bold course of action to consolidate GOP power in the state. He, along with his Republican allies, redrew the lines as the opening salvo to a multistate redistricting plan aimed at accumulating power for his party in states across the country. Enraged by the power play, Democrats fled the state, depriving the Texas House of the quorum it needed to function. The rebels eventually relented under threat of arrest, a rare power in the Texas Constitution used to compel absent members back to return to Austin when the Legislature is in session. The lines were then redrawn, cementing the GOP majority the delegation has enjoyed in Washington for the past two decades. However, what's at play this time is different than in the early 2000s, when Republicans had a newfound majority in the Legislature and had a number of vulnerable Democratic incumbents they could pick off. Now, Republicans have been entrenched in the majority for decades and will have to answer the question of whether there's really more to gain, said Kareem Crayton, the vice president of the Brennan Center for Justice's Washington office. 'That's the tradeoff. You can do that too much so that you actually make them so competitive that the other side wins,' Crayton said. 'That's always a danger.' Texas Republicans are planning to reconvene Thursday to continue discussing the plan, according to Rep. Beth Van Duyne, R-Irving, and Rep. Wesley Hunt, R-Houston, who said they will attend the meeting. Members of Trump's political team are also expected to attend, according to Hunt and two GOP congressional aides familiar with the matter. Natalia Contreras is a reporter for Votebeat in partnership with the Texas Tribune. She's based in Corpus Christi. Contact Natalia at ncontreras@ Disclosure: New York Times has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here. Big news: 20 more speakers join the TribFest lineup! New additions include Margaret Spellings, former U.S. secretary of education and CEO of the Bipartisan Policy Center; Michael Curry, former presiding bishop and primate of The Episcopal Church; Beto O'Rourke, former U.S. Representative, D-El Paso; Joe Lonsdale, entrepreneur, founder and managing partner at 8VC; and Katie Phang, journalist and trial lawyer. Get tickets. TribFest 2025 is presented by JPMorganChase.

Missouri approves stadium aid for Kansas City Chiefs and Royals and disaster relief for St. Louis
Missouri approves stadium aid for Kansas City Chiefs and Royals and disaster relief for St. Louis

San Francisco Chronicle​

time16 minutes ago

  • San Francisco Chronicle​

Missouri approves stadium aid for Kansas City Chiefs and Royals and disaster relief for St. Louis

JEFFERSON CITY, Mo. (AP) — Missouri lawmakers on Wednesday approved hundreds of millions of dollars of financial aid to try to persuade the Kansas City Chiefs and Royals to remain in the state and help the St. Louis area recover from a devastating tornado. House passage sends the legislative package to Republican Gov. Mike Kehoe, who called lawmakers into special session with a plea for urgent action. Kehoe is expected to sign the measures into law. Missouri's session paired two otherwise unrelated national trends — a movement for new taxpayer-funded sports stadiums and a reevaluation of states' roles in natural disasters as President Donald Trump's administration reassess federal aid programs. The stadium subsidies already were a top concern in Missouri when a deadly tornado struck St. Louis on May 16, causing an estimated $1.6 billion of damage a day after lawmakers had wrapped up work in their annual regular session. The disaster relief had widespread support. Lawmakers listened attentively on Wednesday as Democratic state Rep. Kimberly-Ann Collins described with a cracking voice how she witnessed the tornado rip the roof off her house and damage her St. Louis neighborhood. Collins said she has no home insurance, slept in her car for days and has accepted food from others. 'Homes are crumbled and leveled,' said Collins, adding: 'It hurts me to my core to see the families that have worked so hard, the businesses that have worked so hard, to see them ripped apart.' Lawmakers approved $100 million of open-ended aid for St. Louis and $25 million for emergency housing assistance in any areas covered under requests for presidential disaster declarations. They also authorized a $5,000 income tax credit to offset insurance policy deductibles for homeowners and renters hit by this year's storms — a provision that state budget director Dan Haug said could eventually cost up to $600 million. The Chiefs and Royals currently play football and baseball in side-by-side stadiums in Jackson County, Missouri, under leases that expire in January 2031. Jackson County voters last year defeated a sales tax extension that would have helped finance an $800 million renovation of the Chiefs' Arrowhead Stadium and a $2 billion ballpark district for the Royals in downtown Kansas City. That prompted lawmakers in neighboring Kansas last year to authorize bonds for up to 70% of the cost of new stadiums in Kansas to lure the teams to their state. The Royals have bought a mortgage for property in Kansas, though the team also has continued to pursue other possible sites in Missouri. The Kansas offer is scheduled to expire June 30, creating urgency for Missouri to approve a counter-offer. Missouri's legislation authorizes bonds covering up to 50% of the cost of new or renovated stadiums, plus up to $50 million of tax credits for each stadium and unspecified aid from local governments. If they choose to stay in Missouri, the Chiefs plan a $1.15 billion renovation of Arrowhead Stadium. Though they have no specific plans in the works, the St. Louis Cardinals also would be eligible for stadium aid if they undertake a project of at least $500 million. Many economists contend public funding for stadiums isn't worth it, because sports tend to divert discretionary spending away from other forms of entertainment rather than generate new income. But supporters said Missouri stands to lose millions of dollars of tax revenue if Kansas City's most prominent professional sports teams move to Kansas. They said Missouri's reputation also would take a hit, particularly if it loses the Chiefs, which have won three of the past six Super Bowls. 'We have the chance to maybe save what is the symbol of this state,' Rep. Jim Murphy, a Republican from St. Louis County, said while illustrating cross-state support for the measure. The legislation faced some bipartisan pushback from those who described it as a subsidy for wealthy sports team owners. Others raised concerns that a property tax break for homeowners, which was added in the Senate to gain votes, violates the state constitution by providing different levels of tax relief in various counties while excluding others entirely.

House GOP approves ‘technical changes' to Trump agenda bill
House GOP approves ‘technical changes' to Trump agenda bill

The Hill

time17 minutes ago

  • The Hill

House GOP approves ‘technical changes' to Trump agenda bill

House Republicans on Wednesday greenlit a series of 'technical changes' to the party's tax cut and spending package, removing language that would have thrown their effort off course in the Senate. The chamber approved the tweaks — which were tucked inside a procedural rule for a separate measure — in a 213-207 vote, weeks after Republicans passed the sprawling package full of President Trump's legislative priorities. The adopted rule also tees up a final vote on the White House's bill to claw back $9.4 billion in federal spending. House GOP leaders moved to make the changes after the Senate parliamentarian scrubbed through the legislation — a procedure known as the 'Byrd bath' — and identified provisions and language that do not comply with the strict rules for the budget reconciliation process, which the GOP trifecta is using to circumvent a Democratic filibuster in the Senate and approve the bill by a simple majority. Leaving the legislation as it was risked the parliamentarian ruling that it was not compliant, which would have resulted in the threshold for passage in the Senate increasing from a simple majority to 60 votes — allowing Democratic opposition to block it. The changes to the Trump agenda bill — officially titled the 'One Big Beautiful Bill Act — pertain to defense funding, energy policy and changes to Medicaid. For defense, Republicans nixed $2 billion for the enhancement of military intelligence programs; $500 million for the development, procurement and integration of maritime mines; and $62 million to convert Ohio-class submarine tubes to accept additional missiles. On the energy front, meanwhile, the changes removed a provision that would have reinstated leases for a proposed copper and nickel mine that had been renewed under the first Trump administration but revoked under Biden. The mine would have been located near an area known as the Boundary Waters Canoe Area Wilderness, a nature preserve that contains canoe routes and species including black bears, moose and foxes. While leaders moved to strike some portions of the bill, they still plan to fight for those provisions when the package hits the Senate floor. 'We disagree; ultimately we're going to try it again on the Senate floor,' House Majority Leadere Steve Scalise (R-La.) said Tuesday. ' We disagree with the parliamentarian. … But you can't take the risk on any of them. You cannot take the risk because if any one of them is ruled on the Senate floor to be fatal, it's a 60-vote bill. The whole bill is a 60-vote bill — you can't take that risk.' With the changes made, the House is now expected to formally send the package to the Senate, where Republicans are mapping out their own changes to the behemoth bill. Some GOP senators want to decrease the state and local tax (SALT) deduction cap, others are pushing to increase the spending cuts in the bill, and a subset are pressing for a smaller rollback of the green energy tax credits that Democrats approved in 2022. Any changes to the House bill in the Senate, however, risks party leadership losing support in the lower chamber, which will have to approve the Senate's tweaks before the bill can head to Trump's desk for signature. Party leaders are still hoping to enact the package by July 4, but that timeline is coming into serious question as Republicans remain at odds over a series of high-stakes issues. Rachel Frazin contributed.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store