Hot Topic: CAGIT, COIT, EDIT, Whatzit? Indiana's Local Income Taxes

In 1974 Indiana created its first local income tax, the County Adjusted Gross Income Tax, known as CAGIT. It was mainly for property tax relief. During the 1980s two more local income taxes were created, the County Option Income Tax (COIT), and the Economic Development Income Tax (EDIT). The former added revenue for general spending, the latter for economic development projects and capital projects.

Through the 1990s these three tax options stood, with small modifications now and then, and almost all counties adopted at least one.

Then, in 2002, tax restructuring eliminated the property tax on inventories. The legislature allowed counties to increase EDIT to offset the shift of property taxes to homeowners. Forty-two counties took them up on the offer.

In 2007 homeowner property tax bills threatened to increase a lot. The legislature responded with three new local income taxes. One would freeze the civil operating property tax levy. Another would reduce property taxes for all taxpayers, just homeowners, or just homeowners and landlords. A third would increase funding for public safety, including police, fire, corrections and emergency medical services. Counties were given until July 31 to adopt. Few did, so the 2007 deadline was extended to December 31.

So, Indiana has three local income taxes. Or seven local income taxes. Depends on how you count. But any way you count, in coming years Indiana may move its local tax base away from property, and towards income, in a very big way.

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