The latest proposal for an Economic Development Income Tax comes to a head this Saturday.

To make sure its members understand how the tax works, the Builders Association of Kosciusko and Fulton County gathered Monday to hear the specifics of how EDIT is collected, distributed and spent. Providing those specifics were attorneys Richard Hill and Randolph Rompola of the Baker & Daniels law firm in South Bend, both of whom specialize in tax and municipal financing law.

"The legislative theory behind EDIT is that governmental units can fund infrastructure improvement projects with a source of revenue other than a reliance on property taxes," Hill said.

The tax was devised in the early 1980s to give county and municipal governments greater flexibility to address infrastructure needs that foster economic development, Rompola said.

"To the extent you are able to provide services for residential, commercial and industrial growth, EDIT spurs economic development," he said. "Gone are the days when the federal and state governments are providing grants to fund projects. Now it's more of an issue of what are you (local governments) doing to help yourself."

EDIT offers some advantages to local governments that other local income taxes do not, he added. The County Adjusted Gross Income Tax and County Option Income Tax are used as general revenue, not for specific projects, and they also contain property tax replacement provisions that allow a portion to replace property taxes.

"The state collects and distributes EDIT following the same procedures it collects other state and local taxes," Hill said. "It is paid for by individuals who reside in the county imposing the tax, and by individuals who work in the enacting county and live in another county that does not have EDIT, CAGIT or COIT in effect."

The state collects EDIT and distributes the funds to the government entities within the county based on either population or assessed property value, depending on which method the county selected when establishing the tax. The current proposal calls for EDIT to be distributed based upon population.

Additionally, because EDIT is based on adjusted gross income, senior citizens relying solely on Social Security would not be subject to EDIT, because Social Security is exempt from the adjustment gross income determination. Other pension and retirement fund income would be subject to the tax, Hill said.

Warsaw Mayor Ernie Wiggins said that while retired citizens' retirement fund payments would be subject to EDIT, the tax is a more equitable way to fund capital improvements than relying on property taxes.

"While it's true that those with retirement pensions will have to pay EDIT, because those payments go into their adjusted gross income, they are going to have the wherewithal to pay that," he said. "I still say EDIT is a more fair tax for people on a fixed income (Social Security) because they are exempt from it and they can't afford higher property taxes."

If the county taxpayer receives a credit for the elderly or disabled under the federal tax code, they would also be able to receive a credit against EDIT. The amount would be 15 percent federal credit, or the amount of EDIT paid, whichever is less.

In order for a county, city or town to receive EDIT funds, it must first adopt a capital improvement plan, specifying what the EDIT revenue will be used for. The plan must contain an estimated cost of the project and all sources of funding, as well as the planning, development and construction schedule for each project on which EDIT is used.

"The capital improvement plan must encompass at least a two-year period and account for at least 75 percent of the EDIT revenue expected to be received by the taxing unit during the period of the plan," Hill said.

He added that in lieu of adopting a capital improvement plan, a town, city or county may designate all or part of its share of EDIT revenue to another taxing unit in the county. Failure to adopted a capital improvement plan will result in that unit's share of EDIT revenue being distributed to the county and other cities and towns.

Hill said any taxing unit within the county can also propose rescinding EDIT at anytime. The same procedure is followed for establishing and rescinding EDIT.

"Any unit within the county can begin the process. Under the current proposal, Warsaw began the process," Hill said. "After the initial EDIT resolution is adopted, the county auditor must notify the other taxing units in the county, which have 30 days to vote on the ordinance.

"That's where you are now in the process, with the county council set to vote on the resolution this Saturday," he said.

Each government unit in the county is included on the County Income Tax Council, where the members are assigned votes according to population. In Kosciusko County, the county government holds 67 votes of the 100 on the income tax council. Therefore, if the county council approves the EDIT resolution, the tax will become effective July 1. [[In-content Ad]]