Carmel prevails against state in local income tax lawsuit
(THE REPORTER) — On Tuesday, the City of Carmel prevailed in the lawsuit filed against the State of Indiana to challenge the law that transfers Carmel’s local income tax dollars to Fishers.
Local income tax dollars are used to fund essential city services and infrastructure projects that are beneficial to residents of Carmel, and includes funding for public safety, resident programming, street paving and sidewalk reconstruction, among others.
According to Carmel officials, this unconstitutional law has harmed the city and its residents since 2020 by taking Carmel’s local income tax dollars and transferring them to Fishers.
“I am thrilled this violation of the law has been settled and would like to thank the Honorable Judge John M.T. Chavis, II for striking down this unconstitutional special law and affirming what Carmel already knew; this special law unfairly targeted only one city in the entire state – Carmel,” Mayor Sue Finkam said. “If we had not prevailed it would have resulted in approximately $56 million of revenues moving from Carmel to Fishers, dollars that would have deprived our residents of critical infrastructure needed for our city.”
The Court stated in its Order that, “Curing the evils of special legislation was the very reason why the Constitutional Convention of 1851 was convened. The Defendants have no cognizable interest in enforcing an unconstitutional law just as Fishers has no cognizable interest in receiving LIT Funds under an unconstitutional law.”
With this ruling, the State of Indiana, through its Department of Local Government Finance, must now once again follow the state’s general law and begin distributing local income tax funds through Hamilton County to Carmel and Fishers in the same manner as it had for decades until 2020.
The Court held that, “Whether labeling it the Defendants’ failure to carry its burden to show that a general law cannot be made applicable or calling it Carmel’s successful demonstration that the specified class’s characteristics are not defining enough, the Fishers Transfer [of local income tax dollars] violates Article 4, Section 23.”
“We strive to have cooperative relationships with neighboring cities,” Mayor Finkam said. “However, when special laws are passed that overstep legal bounds and harm our community, we will act.”