Republicans at Indiana House are proposing sweeping tax cuts for businesses and individuals, although the Republican state governor and the state Senate have been cautious about taking any significant action this year.
The House proposal released Tuesday night would reduce Indiana’s current personal income tax rate from 3.23% over the next four years to 3.0%.
This would ultimately reduce the state’s tax collections by around $ 500 million per year when fully implemented in 2026. The plan also offers cuts to several trade taxes, potentially reducing those tax bills by 700 million. million dollars to 850 million dollars per year.
The proposal comes as officials estimated that a significant increase in state tax revenue would push Indiana’s budget surplus to $ 5.1 billion, or 29 percent of state spending, from here at the end of next June.
Holcomb and senior Senate Republicans took a cautious stance on possible tax cuts during this year’s legislative session, saying they were concerned about inflation and a possible slowdown in perceptions of state sales tax when federal COVID-19 relief payments end.
House Speaker Todd Huston said on Tuesday he would continue to push Holcomb and Senate leaders to support substantial tax cuts.
“I am confident that with over $ 5 billion in potential reserves and a structural surplus of $ 2 billion, we can responsibly cut taxes,” Huston said. “We’re not trying to do anything that doesn’t position Indiana well, not just for 2022, but 2023 and beyond.”
Holcomb said Monday he was open-minded about possible tax cuts, but said he would rather wait for such a move until a new two-year state budget is drafted in 2023 and that there be more certainty about the economy.
The House’s Republican plan would reduce property taxes levied on commercial facilities by nearly $ 400 million a year, according to estimates by legislative staff. Taxes on utility companies would be reduced by about $ 220 million per year, while expanding the sales tax exemption on commercial equipment purchases could cost between $ 85 million and $ 250 million per year.
The proposed changes would make the state government even more dependent on its 7% sales tax, which is already its largest source of revenue and the second highest rate in the country. Indiana’s personal income tax is currently lower than any surrounding state.
Republican Senate Speaker Pro Tem Rodric Bray said he was grateful that the state’s finances are strong enough to consider tax cuts, but that it would be unusual to do so before the next budget process. in 2023.
“The headwinds in our economy, including inflation and labor issues, argue in favor of waiting for a fiscal year so that the state of our economy can become clearer,” said Bray said in a statement Wednesday.
Democratic House Leader Phil GiaQuinta of Fort Wayne said money from the state’s surplus could be used for needs such as helping parents pay for child care costs and reducing child care costs. health care costs. GiaQuinta said adding a child tax credit would also improve the state’s tax fairness.
This legislative body has passed tax breaks for businesses, RV sales, etc., but very rarely we see a real investment in workers in Indiana, ”GiaQuinta said. “It is time to do the same for the low and middle income families that we find in each of our communities.
Huston said his priority was to “give people their money back.”
“I think it’s the best investment we can make,” Huston said. “Give it back to the Hoosiers and let them spend it instead of trying to create more government programs.” “