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Ball State study reveals potential for more than $200M reduction in tax revenue for local governments

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Posted at 8:13 AM, Apr 20, 2020
and last updated 2020-04-20 08:13:24-04

INDIANAPOLIS — According to a study released by Ball State University’s Center for Business and Economic Research, the closures happening due to coronavirus concerns could cost local governments more than $200 million in tax revenue, and that is the optimistic scenario.

Over the past several weeks there has been a major decrease in several streams of specific tax revenue coming in to local and state governments.

Michael Hicks, director of the Center for Business and Economic Research at Ball State, says this will likely lead to some communities being forced to make some tough decisions.

“They have a very high local income tax, they rely on food and beverage and innkeeper tax or they have a very large casino tax,” Hicks said.

Hicks’ team at Ball State has been studying the potential long-term impacts of COVID-19 on the state’s economy. In a recent study they conducted, they found local governments across the state of Indiana could face a combined hundreds of millions of dollars in tax revenue reduction.

"I think we're closer to $360 million which is tough for local governments because there's no fat for most local governments in Indiana, but it's not catastrophic,” said Hicks.

The expectation from Hicks is that there will be a trickle down effect for Hoosiers. However, he doesn’t see that coming in the form of people seeing higher taxes. Most people in Indiana are paying at our near the property tax capacity. Hicks believes the impact we’ll see is in the form of government services.

“So maybe your parks aren't going to be mowed as frequently. Maybe there is going to be a longer wait in line at the city county office. I would be more worried about service cut backs than I would be about higher taxes in most communities,” Hicks said.

That could also mean local government jobs could be on the line.

"Or furlough workers perhaps one day a month for the next year. If you think about the ways that state government or local government can cut money back it's almost all people,” Hicks said.

Hicks said there is some good news, which is that Indiana’s state and local governments appear to have been far more prepared for something like this than other places across the country.

"I think we entered the downturn with some gaps in public services, but we certainly had a much bigger state rainy day fund. I think most of our local governments have a rainy day fund,” said Hicks.

Which means we could see a swifter economic recovery.

Click here to read the full report released by Ball State.