As Hoosiers brace for the impact of 2025’s Senate Enrolled Act 1, Lake County Financial Director Scott Schmal is encouraging municipalities and the county to work together.
“I look forward to, hopefully, working with, hopefully, the city of Gary and other communities as we navigate our way through this new legislation and new revenue opportunities that we may have to implement,” Schmal said. “More of a partnership than working against each other will be helpful for all of us.”
Gary Common Council Vice President Darren Washington, D-at large, hosted a community forum with Schmal Monday night, looking at the changes in SEA 1 and how it will affect Gary and surrounding communities. Councilman Dwayne Halliburton, D-2nd, also joined Monday’s forum.
According to Post-Tribune archives, SEA 1 was signed into law in 2025, and it established a new property tax system by saving two-thirds of taxpayers up to $300 on their 2025 property tax bill while local governments will lose $1.4 billion through 2028.
“I know Gary and East Chicago, notably, will be hit,” Washington said Monday. “There’s only a certain percentage of an income tax that can be levied. After the municipal elections in 2027 and 2028, cities and towns will have the authority to start adopting those local income taxes.”
Local income taxes are not as sustainable as property taxes, Washington said, and local officials need to look at ways to fund local government.
Schmal presented numbers that he compiled in late 2025, he said.
“(I did this) mainly out of necessity,” Schmal said. “I didn’t see this information available for any of the cities or towns or counties across the state. … So I took it upon myself to really pull this information together to really try to understand what it means to have to pass a local income tax within cities and towns and still maintain one for the county itself.”
According to Schmal’s presentation, a local income tax is a tax on adjusted gross income to fund local services including public safety and infrastructure. He looked at 18 Lake County cities and towns’ 2024 levies, collections and projected 2028 adjusted gross income.
Gary’s net assessed value in 2024 was a little more than $2.2 billion, Schmal said, with its 2020 census population of 69,093 people. Its 2024 levy was about $94.5 million, and collection was about $34 million, making the collection rate 36.1%.
In 2028, the adjusted gross income for Gary is about $1.37 billion, according to Schmal’s presentation. The city is projected to lose $9.7 million in revenue due to SEA 1, which is the highest loss of Lake County cities and towns. East Chicago is second with a $5.47 million loss.
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However, since Gary had a lower collection rate, Schmal added about $6.2 million back to its loss, because he said the city wasn’t collecting it anyway. The city would still lose about $3.5 million.
In order to make up for its SEA 1 revenue loss, the city would have to implement a 0.26% tax. However, the city will also lose about $7.67 million to fund public safety, which would require a 0.56% tax to make up for it, and it will also lose about $7.1 million in its County Economic Development Income Tax, requiring a 0.52% local income tax.
To break even on all these losses, Schmal said Gary will need to implement a 1.34% local income tax.
Lake County, as a whole, is expected to lose about $28.6 million in revenue from property taxes. The county is also projected to lose about $15.4 million for public safety and about $14.89 million in CEDIT.
To make up for the loss, the county will have to implement an additional 0.54% local income tax.
East Chicago, the second most affected city, will need to implement a 2.57% local income tax to make up for the revenue, public safety and CEDIT losses.
Between the projected county and city taxes, Gary residents will pay 1.88% in local income taxes, and East Chicago residents will pay 3.12%.
“It’s kind of shocking information,” Schmal said. “Even Gary’s 1.8(% tax) is a pretty tough one to look at.”
Gary resident Jenny Rudderham asked why the city will be hit harder than others in the region. Schmal said that Gary’s cost per capita is “much higher” than other communities, and the revenue loss is a big loss for the city.
If the Indiana General Assembly doesn’t make changes, Schmal said these numbers are a reality for Lake County and its municipalities.
Additional local income taxes are “100% likely” for municipalities, he added.
“I mean, unless the city or town decides not to have one,” Schmal said. “I’m going to assume that the future council in the county is going to have to maintain some level of (local income tax), otherwise the services that are going to be cut or reduced are going to be noticeable.”
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