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Controller outlines how new state tax law will shift revenue from property to income
Summary
City controller provided Greenwood Common Council an overview of Indiana Senate Bill 1, describing a five-year phaseout of homestead and supplemental property deductions, changes to business personal property exemptions, a new local income tax framework beginning in 2027 and other provisions that will affect local levies and borrowing options.
Controller Wright briefed the Greenwood Common Council on Senate Bill 1, which he said the governor signed on the 15th, and described several provisions that will change local revenue calculations.
Wright summarized the bill’s core changes: “phasing out the homestead deduction and the supplemental deduction. So that's a 5 year phase out.” He said the legislation will replace some property-tax revenue with a new local income tax system beginning in 2027, change business personal property exemptions, and add a new $300 (or 10%) credit on final bills beginning in 2026.
Why it matters: Wright said the combined effects will lower assessed values and therefore push local tax rates higher to maintain revenue. He told the council the city currently receives just over $15.5 million in local income taxes (2025 figure) and that the council will be asked in future years to adopt a municipal portion of the new local income tax, which he said could be up to 1.2% within a countywide cap of 2.9%.
Wright explained other provisions the council should expect: increases in circuit breaker impacts that reduce levy collections, a change to the exempted threshold for business personal property (from $8,000 to $2,000,000 in the amended bill text) while exempting newly purchased business personal property, new limits on short-term debt issuances (prohibiting 1- or 2-year notes and favoring five-year or longer bonds), and conversion of certain over-65 and disabled deductions into bill credits that come off the top of levies.
Council members asked for follow-up modeling and guidance on how the county will set its share of the local income tax; Wright said the council should expect more analysis from county officials and that the city will need to quantify replacement revenue needs when the new tax system is implemented.
The controller also noted House Bill/Code 1461, a road-funding bill that had not yet been signed by the governor; he said the council would be asked later in the agenda to postpone consideration of Ordinance 25-09 until legal staff can clarify language tied to that road bill.
Ending: Wright recommended the council anticipate higher tax rates and fewer short-term borrowing options under the new state law and signaled the city will schedule further briefings and financial modeling as the implementation timeline becomes clearer.
