CROWN POINT | Lake County Councilman David Hamm, D-Hammond, told fellow council members Tuesday they must immediately begin discussing passing an income tax on county residents and employees.
"I'm in favor of a local option income tax, and I don't mind saying so. I'm not going to be a popular guy for this, but I can sleep at night knowing I'm doing the right thing," Hamm said after being named chairman of a committee of three councilmen to review options in light of proposed legislation governing any new income tax.
Hamm asked for formation of the committee at the end of Tuesday's council meeting. "We've been afraid to talk about it. We need to investigate the issue. We don't want to hide from it."
Lake is the only county in the state that hasn't adopted a local income tax and is being punished for its refusal by the General Assembly, which has frozen the total amount of property taxes, called a levy, collected annually since 2007.
Lake officials previously have opposed such a tax as unfair to working people because business income is exempt. Income tax advocates in state government say Lake County has become over-reliant on property taxes that place too great a burden on business.
However, debates over the merits of an income tax have been overshadowed by a fiscal crisis in local government finances.
Lake's county, municipal and township government units have lost tens of millions of dollars in recent years not only to the the freeze on Lake's property tax levy, but also because of a separate statewide law that reduces the amount of taxes that can be extracted from any single property, and plummeting property assessments in the wake of the recent economic downturn and housing crash.
County government has been forced to shed 300 jobs from its payroll, and the council borrowed $15 million this year to avoid either deficit-spending or making even deeper cuts. Larger fiscal problems loom in 2014, and council members said they don't want to borrow more.
There has been private talk among county officials of imposing a combination of income tax rates that would amount to either 1.25 percent or even 1.5 percent of an individual's income to generate enough money to meet rising expenses in operating the county jail and an upcoming consolidation of all the county's E-911 emergency police and fire communications network.
But last month's introduction of amended legislation, now known as Senate Bill 585, may change those calculations.
It offers Lake County an incentive to pass a 1 percent income tax by unfreezing its property tax levy and giving local officials the freedom to spend three-fourths of the estimated $96 million the income tax generates on any government operational need.
The remainder goes to economic development projects, such as South Shore commuter train extensions.
Hamm said he is concerned that if Senate Bill 585 is passed, it would cap Lake's income tax at no more than 1 percent and leave county government's future budgets millions of dollars short of breaking even.
Hamm's committee will be joined by Councilman Jerome Prince, D-Gary, and Councilman Eldon Strong, R-Crown Point. Hamm said he expects to hold public meetings.