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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA bill aimed at adjusting the way income taxes are distributed in Hamilton County seeks to address a disparity in revenue received by Fishers—a situation that has lingered for years.
Indiana Sen. Kyle Walker, R-Fishers, said Senate Bill 290 would provide a more representative amount of local income tax dollars to Fishers based on its population while also raising the amounts received by other Hamilton County cities and towns, including Carmel.
Walker said the bill will need to be amended once it receives a hearing in the Tax and Fiscal Policy Committee to address a correction in the calculation of the local income tax formula. Under the current language, the bill would take money from Carmel, but Walker said that will be fixed in the amendment.
The bill has not yet been scheduled for a hearing by the committee. Walker and Sen. Travis Holdman, R-Markle, co-authored the bill.
Once the bill is amended, Carmel would be projected to receive $77.5 million in local income tax next year, while Fishers would receive $49.7 million. That would represent an increase of $7.1 million for Fishers and $1.5 million for Carmel from what the cities are set to receive in local income tax revenue this year.
“There’s still a very significant disparity in very similarly situated cities,” Walker said. “But the intent is to try to correct for the loss that Fishers has seen over the last 15 years while not causing its own burden on the other local taxing units.”
Local income tax revenue distributions are typically placed in a pot and distributed to local governments in accordance with a state-mandated formula, one that considers each community’s property tax levy and the amount of income taxes the city received the previous year. Units of government in Indiana received more than $3.7 billion of local income tax revenue in 2024, according to the Department of Local Government Finance.
The proposal in the bill would increase the amount of eligible tax revenue returns by reducing the amount local governments are required to set aside as reserve funds, with Fishers receiving the greatest share of the increase.
“Fishers sees the most benefit of this correction, but they’ve also been the most harmed by this imperfect calculation,” Walker said.
Walker said local government units are expected to experience a drop in local income tax revenue in 2027 due to lower collections, but he said the funding amount will likely return to normal in 2028.
“This is not just a Carmel vs. Fishers conversation,” he said. “It is how do we distribute local income tax in Hamilton County. It just happens that there’s history because Fishers and Carmel.”
Fishers Mayor Scott Fadness said that he supports Senate Bill 290.
“Due to the way the law is written today, it prevents Fishers from growing its levy in proportion to its population and assessed value growth,” Fadness said in written remarks. “This bill allows us to equalize our levy without causing undo harm to our neighboring communities.”
Carmel Mayor Sue Finkam said she cannot support the bill as it is currently written before the amendment Walker plans to add to the proposal.
“We cannot support this legislation as written as it would negatively impact our budget by millions of dollars. I have a fiduciary responsibility to the taxpayers of Carmel. We will continue to work toward a resolution that does not harm our residents,” Finkam said in written remarks. “We do support distribution of Local Income Tax (LIT) that is determined by the residency of taxpayers, who expect and deserve to have their tax dollars directed toward local services such as public safety and infrastructure.”
A previous attempt to provide Fishers with additional local income tax revenue redistributed money away from Carmel.
In 2020, the Indiana Legislature passed House Bill 1113, which limited Carmel to a 2.5 percent increase in annual income tax growth for three years and diverted excess funds to Fishers.
The legislation’s goal was to account for a quirk in the way income taxes are distributed so the revenue more accurately reflects the cities’ increasingly similar populations and median household incomes. Both Carmel and Fishers have populations in excess of 100,000 people, with Fishers slightly ahead of Carmel. An expected annexation of land southeast of Fishers could boost the city’s population to as many as 109,000 later this year.
The law was set to expire at the end of 2023. However, legislators that year passed House Bill 1454, which extended the law through 2026.
In 2023, Carmel successfully filed a lawsuit over the state law that diverted local income tax funds to Fishers. Carmel argued the law harmed the city by depriving it of tens of millions of dollars in local income tax revenue it would have otherwise received, and that the city would have lost about $56 million in revenue to Fishers through 2026 had the law remained in effect.
Marion Superior Court Judge John M. T. Chavis ruled last March that HB 1454 was unconstitutional.
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Why does there need to be a law around distributing local income taxes. Would it not be easy to just have each municipality get the local income tax that was paid by a municipalities residents (and businesses if appropriate)? Equal number of residents does not especially mean that taxes paid are equivalent as taxes paid is dependent upon number of working residents and their average wage. On tax forms, the county of residence is declared but so is the home address which will give the municipality lived in; therefore to argue that it is unknown how much is paid from residents of a locality is merely a recording issue.
Oh Kelvin. That would be far too logical.
My question is why does this only impact Hamilton County?