The 0.50 increase would be divided between two types of local-option income tax, or LOIT: A public safety tax that could generate roughly $14 million in new revenue and a property tax-relief LOIT that would be used to offset the higher income taxes with lower property taxes for certain property owners.
Because people who own more expensive homes already pay the maximum amount of taxes under the state tax caps, the proposed property tax-relief LOIT would not offset their higher income taxes.
That means a person who makes $102,000 a year and owns a $205,000 home would pay $41.25 more in income taxes per month, while a person with a household income of $53,000 and $105,000 home would see his or her taxes increase by 75 percent less – about $10.50 a month – if council applies the property tax relief only to homeowners.
“As always, there's pluses and minuses to every decision you make,” city Controller Pat Roller told council members Tuesday.
The difference between the amount paid by taxpayers with more expensive homes and those on the lower end of the scale would diminish if council were to spread the property tax-relief revenue among other categories, such as businesses and apartment complexes.
For example, if council were to apply the property tax relief to all three types of property – homes and farms; rental homes and apartment complexes; and businesses – the person earning $102,000 would still pay $41.25 more per month, but the person who earns $53,000 would see an increase of $19.58 because the property tax relief would be spread among more properties.
Overall, most Fort Wayne residents are happy with the services the city provides and with their current tax rates, according to a recent study by the Mike Downs Center for Indiana Politics.
While the study found that most residents do not want to pay more taxes, it also suggested they do not want the city to cut back on its services, Andy Downs, the center's director, told council members Tuesday.
“People seem to like the services that are being delivered, and they like the rate they're being taxed at,” Downs said. “Not a lot of appetite for a tax increase, not a lot of appetite for service cuts.”
But with a $6 million projected budget deficit, dwindling cash reserves and a looming backlog of unfixed streets, Fort Wayne officials have said the city must either raise taxes or make deep cuts.
Council is expected to make a decision on the proposed tax increases by the end of June.