The Herald Bulletin

Morning Update

State News

April 15, 2014

Study finds Indiana residents paying more in taxes

INDIANAPOLIS  — A national study found that Indiana residents have paid an increasing percentage of their income on state and local taxes at the same time their average income was shrinking.

The study by the conservative Tax Foundation think tank found Indiana taxpayers shelled out 9.5 percent of their incomes in state and local taxes in 2011. That's up from 8.4 percent a decade earlier, The Indianapolis Star reported.

The study shows Indiana went from being the 43rd-highest-taxed state in 2001 to the 22nd-highest-taxed state in 2011. During that time, per-capita income for the state's residents dropped $1,064, or about 3 percent, to $35.592.

Indiana Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said he was surprised that the report indicated an increased tax burden for residents, but still believed the state has a good mix of state and local taxes.

"They (the Tax Foundation) have a lot of credibility, and I pay a lot of attention to them," Kenley said. "But we make our own judgment calls about what's best for Indiana. We're in a good spot, and we need to keep working at it."

Indiana's tax burden increased despite the General Assembly undertaking massive tax reforms in 2008, including capping property taxes at 1 percent of home values and requiring voter referendums for school and government construction projects to try to curb tax increases.

To make up for that lost revenue, however, Indiana raised the state sales taxes to 7 percent that year, still one of the highest sales tax rates in the nation.

House Minority Leader Scott Pelath, D-Michigan City, blamed the tax burden jump on changes pushed by Republican Govs. Mike Pence and Mitch Daniels.

"This is the result of the clandestine but intentional tax policies of the Daniels and Pence administrations," Pelath said. "We have seen a gradual shift of the tax burden away from corporations and onto the backs of individuals, workers and consumers."

The study, based on Census Bureau data until 2011, covers a period before the Republican-dominated Legislature in the last few years approved cuts to corporate and financial institution tax rates and a repeal of the state's inheritance tax.

Legislators last year also approved cutting the state's current personal income tax rate of 3.4 percent tax in phases to 3.23 percent in 2017. That cut was half of what Pence sought.

"The Tax Foundation findings show that, while we have a competitive tax system, our overall tax burden is still too high," said Kara Brooks, the governor's spokeswoman. "That's why Governor Pence has been pleased to sign over $600 million in annual tax relief into law in the past two sessions of the General Assembly."

Counting only business taxes, the Tax Foundation said Indiana had the eighth-best state business tax climate in 2014, an improvement from 10th in 2013. The foundation noted that the corporate tax, in particular, is being phased down from a high of 8.5 percent in 2012 to a projected 4.9 percent in 2022.

 

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