Indiana Retroactively Reinstates Local Income Taxes, Over Governor’s Veto

June 13, 2013

Two Indiana counties (Jackson County and Pulaski County) had adopted local income taxes to fund the construction of new county jails, which would automatically sunset when the needed funds for the projects were raised. The Pulaski County local income tax expired in 2006 and the Jackson County local income tax expired in 2011, but due to poor oversight by officials and outside auditors, no one realized this and the taxes continued to be collected. The counties never sought an extension but taxpayers in these counties have paid $6 million in non-existent taxes.

A proposal to retroactively authorize the two expired taxes was attached to a bill providing tax benefits to surviving spouses of veterans, and approved unanimously by the Senate and with only one nay in the House. Governor Mike Pence (R) responded by vetoing the measure, saying retroactively approving the taxes was inappropriate and that the money should be refunded. Yesterday, however, the House voted 68-23 and the Senate voted 34-12 to override the veto.

The news articles indicate some level of confusion about what had happened, and a lack of understanding that refunding excess tax collections is a fairly routine process for state officials. One legislator aptly compared it to wages being garnished for a debt you don't owe — the proper remedy is to return the money.

Kudos to Pence, who stood up to it even after they attached it to tax relief for perhaps the most sympathetic constituency imaginable. (In a ninth season episode of The Simpsons, Lisa cons her way on to television by signing up to be the sole opponent to Proposition 305, which she learns provides discount bus passes to war widows.)


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