Pulaski County communities are facing budget deficits, due to a shortfall in local income tax revenues. The issue was brought to the attention of the county council Monday, after Winamac Clerk-Treasurer Melanie Berger noticed a decline in the town’s share of Local Levy Freeze Income Tax funds.
Todd Samuelson with accounting firm Umbaugh and Associates said the idea behind that tax is to compensate for money lost due to the property tax freeze. But that 0.4 percent portion of the income tax hasn’t been able to cover that full amount in recent years.
He said the problem wasn’t noticeable because a stabilization fund had been making up for those shortfalls. But by the end of 2016, that fund was used up, and that’s starting to affect Pulaski County and other local governments. “The impact will be around $500,000 less in revenue in ’17 than what you had in ’16 because the stabilization fund is not there to offset that shortfall,” Samuelson explained. “For the Town of Winamac, that variance is about $95,000 that they’re not going to receive.”
Samuelson pointed out that Pulaski County relies heavily on income taxes. In fact, it has the highest local income tax rate in the state. At the same time, the county’s population is shrinking and also getting older. That leaves fewer people in the labor force to pay those income taxes. While there are some large employers in Pulaski County, many of their workers choose to live elsewhere, taking any potential income tax revenue with them.
To solve the problem, the Pulaski County Council has a few options: cut the county’s budget and force local towns to do the same, raise income taxes even more, or shift some of the burden back to property taxes. Council members felt it wasn’t realistic to have a revised tax structure in place by 2018, so local governments will likely have to dip into their cash balances or transfer money around for at least another year.
