Clarksville's town council is weighing a new 1% tax on restaurant meals, bar tabs, catering orders and delivered food, as town leaders scramble to offset a steep drop in property tax revenue amid concerns about potential firefighter layoffs. The proposal would add a penny to every dollar spent at restaurants and bars, but regular groceries would not be taxed.
The idea comes as Clarksville faces what Interim Town Manager Glen Adams and town officials describe as a serious financial squeeze, according to WDRB. The town relies heavily on property tax revenue to fund public services, and that revenue stream has been shrinking, leaving Clarksville working to balance its budget while covering costs for employee salaries, city vehicles, police cruisers and fire trucks.
Adams was appointed to the interim role in June after the council terminated former town manager Kevin Baity, who had led Clarksville for a decade, according to WHAS11. The town has since hired the search firm SGR to find a permanent town manager, according to the same report, leaving Adams to steer budget strategy during the transition.
Why Property Tax Revenue Is Shrinking
The budget pressure traces back to a major overhaul of Indiana's property tax system. Indiana property owners received a property tax break in 2024, and the state's tax changes have created a broader financial challenge for local governments statewide, per WDRB's reporting. That squeeze deepened after Governor Mike Braun signed Senate Enrolled Act 1 in April 2025, a reform package delivering $1.3 billion in property tax relief to Hoosier homeowners over three years starting in 2026, according to Indiana Senate Republicans.
The same law also raises the exemption threshold for business personal property tax from $80,000 to $1 million per county starting January 1, 2026, and to $2 million in 2027 and later, according to Vorys, shrinking the commercial tax base local governments can draw from. On top of that, the reform creates an automatic 10% homestead tax bill credit capped at $300 starting in 2026, a change that the City of Greenwood notes directly reduces tax collections for local taxing units across the state.
According to the Indiana Department of Local Government Finance, county-specific records include each taxing unit's approved budget, certified net assessed value, tax rate and levy by fund. The broader statewide context includes a 2025 Estimated Property Tax Cap Credits by Unit Report for all counties published by the Indiana Department of Local Government Finance.
What The Tax Would Fund
Clarksville officials are seeking funding through the proposed tax for a capital improvement plan that includes police cruisers, fire trucks, road repairs, sidewalks and parks, per WDRB. Town leaders are also grappling with concerns about potential firefighter layoffs, underscoring how directly the property tax shortfall could hit public safety staffing if new revenue isn't found.
Adams said the food and beverage tax would reduce budget strain and preserve operational funds for day-to-day needs, WDRB reported. Local food and beverage tax uses can range from specific projects to the general fund, according to the Madison County Council of Governments. Clarksville is eyeing the tax for capital items like vehicles and infrastructure, while officials say it would reduce budget strain and preserve operational funds for day-to-day needs.
A Long-Sought and State-Regulated Option
Under Indiana Code Title 6, Article 9, municipalities cannot unilaterally impose a local food and beverage tax; they must first secure explicit enabling legislation from the Indiana General Assembly, according to Justia Law. Clarksville needs that approval before its proposed tax could take effect, and the town council has not taken a final vote on the proposal, per WDRB.
Indiana has used 1% food and beverage taxes before, when Indianapolis and surrounding donut counties used them to help pay for construction of Lucas Oil Stadium, WDRB noted, and state lawmakers later allowed similar taxes to spread to other municipalities.
Where those local taxes exist, they apply to prepared meals and drinks, according to TMA Accounting. The article also discusses new 1% food and beverage taxes in other communities.
A Simpler Path Could Be Coming
A simpler path for towns like Clarksville is discussed here, but the details of any such framework—including its authorization terms and revenue restrictions—are not established by the cited Indiana General Assembly page.
For now, Clarksville's proposal remains just that — a proposal. No final vote has been taken by the town council, and the tax cannot move forward without sign-off from state lawmakers in Indianapolis.
