Why We Need a Commuter Tax

Can we talk?

The Chamber of Commerce has been getting a lot of grief for championing a commuter tax to be paid by folks who work in Indianapolis and reside elsewhere. But the Chamber is right.

Some folks may still picture Indiana as a patchwork of small, quaint towns and family farms, but those days are gone. Indiana’s workforce and population are increasingly metropolitan. Indiana’s growth has been and will continue to be in our urban centers.

The entire state economy depends upon a strong, thriving Indianapolis. Much as our legislators like to ignore fiscal reality, Marion County, along with the state’s other metropolitan counties, is—and has long been—a donor county. Our taxes support more rural areas. (A report published by the Indiana Fiscal Policy Institute in 2010, identified the donors: in addition to Marion County, they included Lake, Allen and Vanderburgh.)

If we want to talk about “makers and takers,” Indianapolis is a maker, and rural Indiana is a taker. Big time.

Despite the GOP’s resistance to taxing most wealthy “makers,” Republicans in control of the Statehouse have continued to ensure that Indiana’s tax structure–which has historically disadvantaged the very areas that generate Hoosier jobs–will continue to bite the hand that feeds the rest of the state. The disastrous, politically-motivated decision to constitutionalize property tax caps has only made matters worse.

Here in Marion County, we are further disadvantaged by the large number of government and nonprofit institutions that pay no property tax. Add the tax caps and the exempt properties together, and we have a revenue crunch of massive proportions—one that cannot be relieved by reliance on the local income tax, or by naïve demands to “cut fat and waste.” We can all argue about the wisdom of certain expenditures (cricket, anyone?), but the amounts involved are—in the larger scheme of things—a drop in the bucket. We’ve cut fat, we’ve cut muscle, and we’re now into bone.

The foregoing are simply facts. Here’s the sermon: Government is not an irrelevant luxury. Businesses as well as individual citizens depend upon the services provided by municipalities—infrastructure, public safety, transportation, garbage collection and a myriad of other services that collectively comprise a city’s quality of life. If we want to continue receiving those services—if we don’t want to be Detroit—we have to pay for them. Taxes are not theft; they are the dues we pay for civilization. We cannot survive without them; the best we can do is ensure that government operates responsibly and that the “dues” we pay are fairly assessed.

That fairness is what has motivated the Indianapolis Chamber of Commerce’s proposal for a commuter tax.

More than two hundred thousand workers commute into Indianapolis each day. They use our streets, are protected by our police and firefighters, flush toilets into our sewers, and enjoy the other elements of the quality of life our taxes have provided, but they don’t contribute to their cost. They pay their taxes to the places where they live.

Paying taxes to the county where your income is generated is hardly a new and oppressive idea. A good number of Indianapolis’ peer cities around the country have adapted to the realities of regional economies and regional workforces. The Indianapolis Chamber has studied commuter taxes extensively, issuing reports in 2002, 2006 and 2007. Its current advocacy is informed by those studies and by the experience of other cities.

Every economic analysis of the Hoosier state confirms that the health of Indiana is inextricably bound up with the health of the Indianapolis metropolitan region. Starving Indianapolis—making it impossible for even the most creative public servants to deliver the services we all depend upon (and incentivizing “smoke and mirror” solutions that give away the store)—is simply not an option.


  1. Query: More people commute into Carmel than commute out. If Indy adopts a commuter tax, would it be fair for Carmel to do so?

  2. Exporting Indianapolis’ fiscal irresponsibility to the suburban counties makes a lot of sense, NOT. How do people like you support such an outrageous tax when we sit and watch hundreds of millions of our local tax dollars being doled out to private real estate developers and the billionaire sports team owners? I understand why the Indy Chamber supports it; it is no longer a business that represents rank-and-file businesses. It is partially funded with our taxpayer dollars now and is nothing more than a lobbying arm for the mayor’s office. There is no revenue shortage in Indianapolis. There is a spending problem caused by extremely corrupt politicians who use our taxpayer dollars to reward their campaign contributors instead of funding basic services.

  3. “That fairness is what has motivated the Indianapolis Chamber of Commerce’s proposal for a commuter tax.”

    No, what has motivated the Chamber is that it is neck deep in promoting corporate welfare in this city, in particular for its downtown area clients. (The organization has lost a lot of members because it stopped representing them.) It wants more cash to do that.

    What in recent history suggests that given more tax dollars that the city leaders would actually spend the money on needed city services? We had a 65% increase in the local option income tax in 2007 for more police officers and we ended up with much less. We have more and more TIF districts across the City which are draining down property tax revenue that used to be used to fund basic services.

    We have more tax revenue coming into the City than ever. Perhaps we should focus on better priorities and spending it more wisely. I just reported consulting contract we just signed where the consultant, KPMG, is going to get $637.50 an hour. That hourly figure includes even clerical workers.

  4. I share Gary’s opinion. I live in Indianapolis. I do not support a commuter tax. Billions of dollars have been collected to subsidize building Sports Stadiums for Mega-Billionaires, once you factor in all the costs. Downtown has had numerous other Direct and Indirect Subsidies, which benefit certain selected companies. Then we have the TIF’s. The list goes on Cricket Fields, repairs to the Natatorium, and probably a new stadium for the Indy Eleven.

    Now we have from an IBJ article, ” IPL is seeking regulators’ permission to bill ratepayers for $16 million in costs associated with extending lines and installing charging stations for a proposed car-sharing service by BlueIndy, a subsidiary of France-based Bollore Group.

    BlueIndy has an exclusive agreement with the city of Indianapolis to provide the car-sharing service, utilizing on-street parking spaces. ” Further – “The cost per month for a typical residence would be 28 cents.”

    This deal for “Blue Indy” is simply one more example of Crony and Monopoly-Capitalism.

    I come from the Left of the political spectrum. I am a firm believer in Public Transportation. I believe our Public Transportation is horrible. Lack of funds is often the excuse given for not upgrading our Public Transportation. However, we always have plenty money for the Colts, and Pacers, and the Speedway.

  5. The Chamber has run the numbers on those who commute “out” vs those who commute “in”, and would be perfectly happy to support allowing the tax to flow both ways.

  6. I have mixed feelings about a commuter tax. On the one hand, it seems to be an opportunity for Indianapolis to do something to actually move the city forward by doing something more substantive and less symbolic than subsidizing a sports franchise. I also think an updated transportation system improves air quality, helps control the cost of fuel by reducing demand, and makes the commute to Indianapolis less stressful for all. On the other hand, I ask why do taxpayers have to bear another burden when we are still paying for the Hoosier Dome?

  7. I have suggested this tax in the past in this space. Lets do it. I am tired of supporting the pampered behinds of the Carmel Republicans. Let these folks pay their way.

  8. Indianapolis is not a thriving Metropolis, it is a city with a mid-20th Century mind-set and sees progress in sports arenas. A commuter tax, I assume, would be for people with money who travel distances (in and out of Indianapolis) much faster while IndyGo service sucks big time. Those who need decent available public transportation at reasonable cost to go to and from jobs are out of luck. Let’s fix that first; we need new and different administration to even hope to accomplish that.

  9. I’m assuming this is similar to the wage tax I paid when I lived in Philadelphia? My paycheck as someone who lived *and* worked in the city was reduced by a small percentage (a few dollars a month IIRC) for the tax; my coworkers who worked in the same office but lived in the ‘burbs paid a slightly higher percentage than I did. It certainly seemed like a fair system to me.

  10. Remember when our culture supported better government and growing businesses? Now the best that we can do is cheaper government and “lean”, read shrinking, businesses.

    Remember when we looked forward to the future? Now the best that the most optimistic yearn for is that today will last forever.

    Is all of that best explained as reality or culture?

    I maintain, culture. We have been robbed of hope by cultural forces. Mass media, entertainment, politics. Why? It’s good for short term business, just like harvesting a crop is great for today whereas planting and cultivating are investments in the longer term.

    Culture is a self fullfilling prophecy.

  11. The above having been said, taxation without representation is tyranny. If people who live elsewhere justifyably contribute to city expenses, they need a say in city politics.

  12. I’m probably confused, but isn’t that the reason that we list on our state tax returns the counties where we live and where we work? Doesn’t the county option tax then go to the county of employment?

  13. People can scream about this all you want, but the fact is, this tax is needed. Now, I’m not necessarily saying subsidizing football stadiums, et. al is a great way to spend tax dollars, but as of right now, that is irrelevant to the future. It’s been done and we have to move on.

    Currently 92% of the cities tax revenue is already spent on public safety and criminal justice. This number is most likely going to increase thanks to our lovely property tax caps. For all “other public services” there is only 4% of general fund revenue (i.e. $25 mil). You can argue about the past and bemoan the way things until you are blue in the face, and I am sympathetic to most of those arguments, but this is a smart, progressive way to “hopefully” impact the future development of the city.

    To attract millenials (full disclose, I am one), a city needs amenities that lead to a high quality of life (i.e. walkable areas of the city, parks, bike lanes, etc.) as well as high paying jobs. This is one way to address the former, as long as the revenue is spent strategically. Though I will readily admit, that is a big if.

  14. Yes, I support a commuter tax. I was surprised when I lived in an adjacent county to the one I worked in that I was not at least partially supporting the county I worked in. In most cases, you spend approximately one-third of your time in the county you work using all the resources available in that location (all infrastructure, often retail, etc.). I think 25% of county rate for a given county should go to the work county and the balance to the residence county if you do not work and reside in the same county. This helps both counties and the bulk goes to the county you reside supporting the programs that brought you to the county. This helps the county you work to continue to attract additional jobs, maintain the infrastructure and keep the businesses (and jobs) that the commuter is taking advantage of.

  15. This at least the 2nd time you’ve discussed the transfer of wealth from urban Indiana counties to rural, however, I believe your assertion is limited to Indiana state and local taxes and not Federal taxes and expenditures. Fed expenditures massively support major urban centers in transportation, water, sewage, energy, education and social services to an extent that goes way beyond what these centers generate in federal tax revenues. I’d be happy to be wrong on this and perhaps I’ll get motivated to research it a bit more.
    Secondly, the statement “The entire state economy depends upon a strong, thriving Indianapolis.” is something of a stretch, since it is based on your “Indy-as-maker-and-everyone-else-as-taker” point of view. However, the economic and social well-being of a number of regions in Indiana depend FAR more on the health of Chicago, Cincinnati, Louisville, and Detroit than they do Indianapolis. And the Northeastern corridor defined by Warsaw-Ft Wayne depends far less on Indianapolis than it does the global markets for surgical medical devices, automotive components, recreational vehicles, defense electronics and many other products and services.

  16. Taxation without representation. What a hoax. Let’s ask the thousands slaughtered since the Korean debacle who represented them at the bargaining table. Now we are saddled with another Hundred Years War. You’ll be represented on fields of valor and wards of horror but not in halls of congress. I didn’t hear a soul elected official complain that undeclared war was unconstitutional but you will be taxed to pay for it.. Who represents those who lie in Flanders Field?

  17. I’m all for more taxes. Why don’t we legalize marijuana? Aside from the obvious — hemp textiles could be a new industry created in Indiana, which could bring down unemployment rates. The taxes earned from the sale of the other stuff could be shore up our tax deficit. Additionally, a VAT would tie Indiana lawmakers and the decisions they make about business to the health of the economy. If they want revenue, then they would have to make policy which grows Indiana jobs, income and attracts business. I’m not sure how a commuter tax will do any of that.

Comments are closed.