CAGIT, EDIT: What are they, and why?
Someone asked the other day about county income taxes, how they got here, what the money is used for, and why we don’t get rid of the taxes since we have all that moolah from the riverboat.
(I don’t like to encourage anyone not to read my columns, but if this subject bores you to tears, you might want to cut it out and put it in your income tax file. Then, when April 15 draws near, you will probably be more interested in the subject.)
Part one: Definition of the two taxes.
To be specific, we’re talking about the County Adjusted Gross Income Tax (CAGIT), which is charged at the rate of 75 cents per $100 of income, and the Economic Development Income Tax (EDIT) at 25 cents per $100. Both are reduced somewhat depending on income tax deductions and/or exemptions.
The taxes are deducted weekly from paychecks and accountable the same as state or federal income taxes on or before April 15.
Everyone pays both taxes, whether they own real estate in Harrison County or not and regardless of where they work. The taxes of those who live here but work in Louisville will eventually be turned over to Harrison County, said Harrison County Auditor Pat Wolfe. That’s because Kentucky and Indiana have a reciprocal agreement to collect and disperse the other’s taxes, she said.
Part two: How, when and why the taxes were adopted.
The Harrison County Council has the authority to adopt or rescind an income tax on or before April of each year. CAGIT was adopted and imposed 14 years ago (in 1990, to be exact) at the rate of $1 per $100 in income for the year, less exemptions. There was no EDIT at the time.
In the late 1980s, folks here screamed the loudest and most often about two subjects: property taxes and dusty gravel roads. By 1990, with support from Farm Bureau members and with the urging and enlightenment from then-councilman Kent Yeager of Mauckport (whose family farm dates to 1873), CAGIT was adopted.
The deal was that CAGIT would ease the property tax burden on farmers whose income in no way related to the value of property holdings. And it would ease the burden on senior citizens who had little income but owned their own homes, which could be heavily taxed as property. Calculations indicated that those folks would come out a little ahead.
The tax was also sold as a way to raise money to pay for road improvements. Heaven only knew, we didn’t get enough to do the job from the state allocation based on gasoline taxes. At the time, most of what was collected had to be used for property tax replacement, and what was left could be used for road or other infrastructure improvements.
Then along came the jail. The feds were threatening to build one for us, at our expense and to their spec, because the old building in Corydon had outgrown its usefulness. Like the old courthouse across the street, its heating, air and ventilation system was just about nil, and the building was crammed with inmates, many of whom slept on floor mats. Some of those guys sued and won their case for a better, more humane facility.
The council decided to build the jail before it became an even more pricey project dictated by a federal judge.
But how to pay for it?
There was talk of EDIT, just like there had been talk of CAGIT, but there were no carrots to dangle. Everyone wanted the drunks, druggies and other miscreants locked away for a long time ‘ the public outcry against crime in favor of law and order was high ‘ but no one much wanted to pay for it. God help the councilman who had the audacity to place another tax on the over-burdened taxpayer. He might have been run out on a rail before the next election!
Then someone had a bright idea ‘ I’m not sure whose it was ‘ but the council reduced CAGIT by 25 cents and gave it to EDIT to pay for the jail. No one’s income tax went up, but plenty of people were still unhappy. Most people didn’t want to pay the tax at all, especially not for a jail. But after a time, things quieted down and the battle front shifted to the push for an animal control facility.
Then, along came Mr. Caesar with his world’s largest gambling ship right down there at Bridgeport. At the time, Bridgeport was a spot in the road, nothing more than that, because the Great Flood of 1937 had wiped out the town. Anyway, it didn’t take long for the tax revenue from Caesars to begin to add up. That money has been spent for dozens of improvements, from medical care to firefighting to better roads to education, etc., etc., but that $1 income tax still stands.
Part three: Why there’s not a snowball’s chance in July of getting rid of CAGIT next year or anytime soon, for that matter.
CAGIT was adopted to reduce property taxes and to fund economic development. Each taxing unit in the county, whether it’s an incorporated town or township, gets a share of CAGIT, part of which is used to reduce property taxes. And, if the tax were abolished, every taxing unit, not just the county, would suffer losses that would have to be replenished. Property taxes would rise accordingly. As it now stands, everyone, not just property owners, pays part of the costs of running local government. So it’s not hard to understand why we’re likely to have this particular tax indefinitely.
Sorry. Please don’t shoot the messenger.
Part four: Why someday EDIT may be doomed. Or not.
EDIT, that 25-cent income tax, is currently used to make payments on the Harrison County Justice Center that opened in August 1996, off Gardner Lane. As of the end of 2003, the latest figure available, we owed $6.6 million. In 2002, when interest rates were at a 30-year low, the commissioners refinanced the mortgage to save on interest rates, about $290,000 worth. The mortgage could be paid off, but not without a substantial penalty.
If that happens, the county would have about $800,000 extra a year. Would the council reduce the income tax or use EDIT to help pay for another project, like the county hospital?
Sorry. Don’t shoot the messenger.