Understanding Indiana Local Government Revenues

There are dozens and dozens of local government revenue sources.  It would take a long time to understand them all.  Since you and I and everyone else have only a short time available, here's a short cut.  It turns out that six revenue sources dominate total local government revenues in Indiana.  Three are taxes, three are state aid programs.  They are:  the property tax, the local income taxes, the motor vehicle excise tax, state aid to school corporations, state property tax replacement credits, and state highway aid.

How dominant are these six?  Here's a table and a chart.

Indiana Local Government Revenue, 2000 Dollars (billions) Percent of Total
Net Property Taxes $4.9 40%
State Aid to School Corporations $3.5 28%
Local Income Taxes $0.9 7%
Property Tax Replacement Credits $0.8 6%
Motor Vehicle Excise Tax (and State Distribution) $0.6 5%
State Highway Aid $0.4 3%
Everything Else $1.4 11%
TOTAL $12.5 100%

The big six make up 89% of all local government revenues.  "Big six" may be a misnomer, though.  Pretty clearly, the property tax and state school aid are far bigger than any of the other sources, and by themselves make up two-thirds of all local government revenue. The other four together are not as big as either of the big two.

Does that mean everything else is not important?  No.  Together, the miscellaneous revenues--a few smaller taxes, state and federal aid, charges and fees, interest earnings and sale of property--are pretty important.  None of them are as big as the big six, though.

Tax restructuring in 2002 will change the look of this pie.  The property tax slice will decrease in size, because the state is going to replace an added 60% of school general fund revenues with state funds (mostly from the sales tax increase).  That mean the PTRC slice will get bigger.  The Highway Aid slice will get bigger, too, because the gasoline tax rate increase will increase payments to local governments for roads.

So, if you want an overview of Indiana local government revenue, start with the property tax and state school aid, continue with the income tax, motor vehicle excise tax, property tax replacement credits and state highway aid.  Know those six, and you'll understand 89% of what you want to know.

Links to More Information

To Find: Go To:
A grounding in the Property Tax This website: Property Tax Overview
A little learning about State Aid to Local Schools This website: State Aid to Local Schools
What it pays to know about the Local Income Taxes This website:  Indiana's Local Income Taxes
Irreplaceable knowledge about Property Tax Replacement Credits This website: Property Tax Overview
A tour of the Motor Vehicle Excise Tax This website:  Motor Vehicle Excise Tax
A roadmap for understanding State Highway Aid This website:  State Highway Aid