There is a one percent sales tax that is collected on businesses in the state of Indiana that sell or help sell food and drink in thirty-three different communities, including Marion County.
The language that would have reformed how cities in Indiana participate in a food and drink tax that is worth approximately $90 million annually was one step away from becoming law in March of last year before it was removed at the last minute by state legislators. However, one of its most ardent supporters has stated that he will attempt it once more this year, which has prompted opposition, even resentment and defiance from certain others.
According to statements made to the Capital Chronicle by Senator Travis Holdman, Republican of Markle, “I think we need to continue the dialogue that we began last year with the food and beverage tax.” “I have a desire to ensure that taxpayers are safeguarded and that when municipal actions regarding taxes on food and beverages are enacted, that the revenues are truly utilized for what they claim they are going to use them for,” the speaker said. “It is important to me that this happens.”
The language that was originally proposed in Senate Bill 390 would have, in addition to introducing standardized expense criteria and stringent requirements for spending reporting, put an end to nearly all of Indiana’s existing taxes on food and beverages by the year 2042, or when project related bonds are paid off. Sen. Gaskill, a Republican from Pendleton who was also a significant supporter, drafted the bill but declined to participate in an interview. Holdman is considered to be the second author.
The language of that bill made its way into House Bill 1002, but it was ultimately eliminated in conference committee, which is the final phase in the lawmaking process and occurs when both legislative chambers resolve discrepancies in the bill that each adopted.
According to statements made by local elected officials and tax administrators, they closely tracked the passage of the law and stated that they will continue to do so in order to defend their towns’ utilization of the revenue.
“Our books are straight,” said Republican Brad Beaver, who has served on the Hamilton County Council for a long period. “… My opinion is that the state legislature should concentrate more on improving themselves and less on worrying about the actions of local governments. You should know that if the people in my county think I’m engaging in questionable behavior, they have the power to remove me from office at any time.
A modest amount of money, but of some utility
A food and beverage tax, often known as a sales tax, is imposed on businesses in the state of Indiana that sell or assist in the sale of food and drink at a rate of one percent. There are some communities where the municipality and the county each have one, bringing the total to 2%.
They made a total of approximately $90 million from tax in the calendar year 2020, which represents a significant decline from the total of $104 million earned the previous year due to the epidemic.
Some of the local units brought in hundreds of thousands of dollars, while their more popular counterparts brought in millions. According to Accelerate Indiana Municipalities, which includes hundreds of local units across the state, the cash does not often make up a significant portion of a local government’s budget but can have a significant influence nonetheless.
According to Matthew Greller, CEO of AIM, “Indiana cities and towns are highly reliant on property tax and income tax, so any diversification in the revenue stream at the local level would be crucial.” “… However, the overall taxes on food and beverages would make up just a small portion of the revenue source in cities and towns, and they would most likely be earmarked for specific initiatives or projects.
In general, each local unit has its own entry in the Indiana Code, which includes a set of laws suited to the local unit’s specific objectives.
The tax was first proposed by a number of local units in order to fund a variety of distinct projects, including the construction of Indianapolis’ Lucas Oil Stadium in central Indiana counties in 2005, the Indiana Basketball Hall of Fame in Henry County in 1987, and Madison County’s proposed riverside event center in 1988, which was never built. However, once the initial bonds were repaid, several of the borrowers were successful in having state laws amended to expand their spending possibilities.
As transparent as glass
Holdman has stated that transparency is the primary reason for his support of previous and upcoming legislation.
An all-inclusive sunset, in the view of those who advocate for social transformation, would provide the communities of Indiana with a fresh start.
The existing hodgepodge of permissible uses of the funds, which range from the extremely particular to the general fund, would be replaced by new spending criteria that would standardize the allowed uses of the monies. Officials and the general public would have access to relatively extensive and up-to-date information regarding expenses if there were requirements for one-time and annual reporting.
When Holdman was asked whether there was a specific neighborhood or project that had inspired him to advocate for reform, he mentioned one of each.
Holdman mentioned that the county of Madison came to mind. “In order to finance the construction of a conference center on the river, we enacted a tax on food and beverages years ago. Because there is not yet a convention center on the river, the money is being put toward something else for the time being. The matter was never presented to the taxpayers as an opportunity for them to voice their concerns.
Later, with the money, Madison County constructed a detention center, in addition to other, smaller projects, most of which involved the county’s infrastructure.
According to Republican Rick Gardner, who serves as the auditor for Madison County, “I think everything is clear and it’s out in the open.”
He detailed the process through which proposed projects are evaluated according to the level of need, after which they are submitted to the council for discussion and appropriation. Gardner mentioned again that the state of Indiana conducts annual audits of the counties.
The possibility of change is met with skepticism and resentment by Beaver, who represents Hamilton County.
He related the story of how, during the administration of the previous Governor Mitch Daniels, the leaders of the “donut counties” were invited to participate to the financing of Lucas Oil. Under the terms of the ensuing tax, the state will keep half of the revenue collected and submitted by cooperating local units on a monthly basis, up until the point at which the state’s annual collections reach $1 million. It is anticipated that the bonds would be settled in full by the year 2037.
According to Beaver, Hamilton County did not obtain what it sought in exchange, which was for state lawmakers to investigate the level of income tax revenue that was being returned to the county. Instead, the county went and got itself an accountant of its own.
“Indianapolis needs to be an attraction; a rising tide raises all boats,” said the mayor. On the other hand, we were never given a thank you. There won’t even be a complimentary ticket to the football game, and you won’t be invited to the groundbreaking ceremony.” Beaver said.
He continued by adding, “So the next when they come back [saying] ‘let’s all join hands,’ if I’m still here, I’ll remember.”
The proposed law from the most recent regular session did not apply to the local entities the taxes of which have sunset dates. This includes the counties of Allen, Marion, and Vigo. Skepticism, though, may still be seen even among some of the locals there.
Allen County initially established its food and beverage tax in order to pay repairs to its War Memorial Coliseum. After those renovations were completed, the tax was extended in order to finance a second round of upgrades. Several years ago, the state legislature made modifications to the tax that broadened its potential applications and established a capital improvement committee to oversee the use of the monies that were allotted to it for a variety of rehabilitation and revitalization initiatives.
Tim Pape, a former commissioner for the capital improvement board, was quoted as saying that “most of the leaders seeking control or limits on the food and beverage tax are purely, in my view, ideologically oriented.” [Citation needed] In the past, he spent ten years representing the Democratic Party on the city council of Fort Wayne.
Pape went on to say that “they’re out of step, in my opinion, with the vast amount of citizens who are very supportive of the investments that the money that goes from the food and beverage tax goes to, at least in Fort Wayne.”
However, even supporters of local government recognize that there is space for improvement in the way Indiana handles taxes on food and beverages.
According to Greller of AIM, the existing system is “fragmented,” and it is “challenging” to get a bill passed via the General Assembly.
Greller stated that “it’s not going to work everywhere,” and he was right. “… But if the community does have those characteristics, then it makes logic to me that if it’s good for one community, it should be good for all communities.
“If we’re talking about a statewide uniform food and beverage tax, then I think we’d certainly be open to safety barriers or any other sort of measure to direct the money into certain types of projects,” he added.
It is unclear at this time what shape a further attempt would take during the legislative session that will begin in January.
“To be completely honest with you, we haven’t really had any talk about it, other than the fact that it’s on our radar to do something,” Holdman said.