What happens to the money?
Allen County Auditor Tera Klutz, who sat on the task force with Kauffman, agrees.
“(Revenue department officials) must work with local governments,” she said, “to make the system work better and there has to be more transparency on their part.”
Hershman’s bill doesn’t include language that Kauffman wanted to see. He wants the state revenue department to start tracking the actual dollars paid to the state each month by employers that withhold local income taxes from their employees, and to put that money into a separate account apart from the state’s general fund.
Using information supplied by employers would be a better system, he argues, than what currently exists: The state pulls that information off the personal income tax forms that taxpayers are supposed to file with the state each year. Or, Kauffman said, let the counties handle the local tax dollars.
“My opinion is if the state can’t figure it out, employers should send their money to the counties instead and let the counties hold the money until the state needs it to process tax returns,” Kauffman said. “But I’m not going to hold my breath for that to happen.”
Kauffman argues that the current system creates a long lag time between when the state collects the LOIT dollars and when it’s paid out to local governments. It also creates another obvious problem in his eyes.
“My question is, what if you don’t file a return?” he said. “... The bottom line is it’s still an estimate from the front end. Nowhere have (state officials) said that they will start keeping track of the money coming from Elkhart County ... and that it will all come back to us. The return is still based on individual tax returns. So, if you don’t file one, you know what happens to the money.”
Kauffman contends it simply stays in the state’s account.