Click here for important updates to our privacy policy.
CARMEL
Jake Allen
Indianapolis Star
In a long-running tug-of-war for state income tax dollars, Fishers stands to gain an extra $8 million next year while Carmel will receive $1.5 million more under a state legislative proposal.
State Sen. Kyle Walker R-Fishers, said Senate Bill 290 seeks to reduce discrepancies in the way income taxes are distributed to the cities in Hamilton County. As written, the bill would take away money from Carmel, but Walker already has plans to amend it should the legislation advance.
“It makes the current imperfect formula, which doesn’t fully account for actual growth, more fair,” Walker said.
Ideally, income taxes collected by the state are generally paid back to the cities in the same proportion as to what they paid into them. But because the taxes are collected from the county as a whole, it is difficult to separate how much each city contributed. Instead, the state estimates the contribution by weighing property tax assessments and collections.
But that method is imperfect and in fast-growing cities like Fishers and Carmel, the formula can get especially skewed, even though the suburbs have similar populations and household incomes.
Carmel in 2025 is projected to receive $76.2 million in income tax dollars while Fishers will collect $42.6 million. Under Walker’s proposal, once amended, Fishers will get $7.1 million more and Carmel $1.5 million in 2026, while other government units like townships would also receive a bump.
That is possible because the proposal increases the pot of eligible tax revenue returns by reducing the amount local governments are required to set aside as reserve funds. Fishers will get the bulk of that increase to reduce the disparity.
Fishers Mayor Scott Fadness said he was satisfied with the legislation.
“Due to the way the law is written today, it prevents Fishers from growing its levy (the amount of property taxes cities are able collect annually) in proportion to its population and assessed value growth.,” Fadness said in a statement emailed to the IndyStar. “This bill allows us to equalize our levy without causing undo harm to our neighboring communities.”
Carmel Mayor Sue Finkam said she opposed the bill as originally filed "because, if enacted as written, it would have a multi-million-dollar negative impact on Carmel’s future." Walker said that filing was an oversight and he plans to amend the bill, but can't do so until it is heard in committee. The bill has not yet been scheduled for a hearing.
Finkam said she will reserve judgment until she sees the amendment has been filed.
"As mayor, I am focused on ensuring that the LIT (Local Income Tax) legislation provides equitable benefits to our residents, and I am appreciative that (co-sponsors) are considering adjustments to the bill," Finkam said. "I look forward to a fair and equitable resolution that does not harm Carmel taxpayers.”
Lawmakers for years have recognized the quirks in the formula and are working on a data collection system to fix it, Walker said.
A legislative measure to correct the flaws in 2020 ended up with Fishers getting $16.7 million over three years that would have gone to Carmel.
Carmel sued, and last March a Hamilton County judge ruled the legislation was unconstitutional because it was considered special legislation favorable to Fishers but harmful to Carmel.
In 2027, all cities are projected to see a decline in revenues because of lower collections but in 2028 they are expected to return to 2026 levels.
Call IndyStar reporter John Tuohy at 317-444-6418 or email him at john.tuohy@indystar.com. Follow him on Facebook and X/Twitter.
