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Hoosiers would see the percentage of their income the state takes for taxes continue to decrease under a bill progressing through the Indiana House of Representatives.
If the state hits revenue goals, Senate Bill 451 would continue lowering the adjusted gross income tax rate annually by 0.05% each tax year through 2032. Senate Tax and Fiscal Policy Chair Sen. Travis Holdman, R-Markle, saw his bill pass his committee unanimously Tuesday morning.
The tax rate in 2025 is 3.0%, and it is already slated to decrease to 2.95% in 2026 and to 2.9% in 2027. Under SB 451, the rate would continue to be phased down to 2.85% in tax year 2029, 2.8% in 2030, 2.75% in 2031 and 2.7% in 2032.
The bill, as written, “allows the legislature to review where state revenues are related to what was forecast and make some decisions to either start or stop the process of rate cuts,” said David Ober, Indiana Chamber’s vice president of taxation and public finance.
A Hoosier making about $70,000 (the state’s median household income) would see $35 less collected each year and a net savings of $735 from tax year 2025 to 2032.
The reduction is expected to bring in about $574.6 million less in state revenue from 2029-32. The state collected $8.1 billion in income tax revenue in 2024. Sales and income tax revenue account for more than 80% of state-collected revenue.
Indiana has one of the lowest income tax rates among the 43 states that haven’t eliminated their income taxes. North Dakota and Arizona have two of the lowest rates in the country with 2.5%, while California, New York and New Jersey each have rates over 10%.
Ober and Andrew Berger, president and CEO of the Indiana Manufacturers Association, both expressed support during public testimony.
The bill would impact about 500,000 businesses that would be paying individual income taxes due to its tax classification, Ober said. That would include sole proprietorships, partnerships, limited liability companies and S-corporations.
Gov. Mike Braun and the legislature’s ambitious plan to slash property tax collections might mean relief for some Hoosiers could be minimal.
“We talked a lot about property tax reform, and one of the things that we think would happen would be income tax increases at a local level to make up property tax relief differences,” Berger said.
Lawmakers have said they want to rebalance the state and local tax structure to provide taxpayer relief and put the onus on local government to raise and spend funds appropriately.
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Yet again, Indiana’s legislators don’t see a future for the state of Indiana worth investing money in.
Well they’ve got one thing right – they have no ability whatsoever to do what’s right with our tax dollars. State has been GOP-supermajority for decades and continues to crumble, but surely they’ll find a way to crumble even more efficiently with less tax revenue.
Even Indiana’s elected officials don’t believe we’re a place worth investing in. Think about it.
The magical thinking is that as the tax burden goes down, people will spend so much more money that revenues will increase. This is called trickle down economics, and it hasn’t worked for the last 40 years. Why should it work now.
You get what you pay for.