Holcomb agrees to cut income tax | Indiana
(The Center Square) – Indiana Gov. Eric Holcomb said Thursday he agreed to lower the state income tax rate to 2.9%, making tax Indiana’s personal income tax one of the lowest in the nation among states that tax residents.
Holcomb made the announcement in a statement sent to the media, citing the state’s increasingly strong financial position and surplus revenue.
“Indiana is financially strong and continues to grow at a rapid pace,” Holcomb said in the statement. “As our revenues beat forecast month after month, it has become clear that now is the time to act on a tax plan that gives back to our growing business community and hard-working Hoosiers.”
The tax plan outlined by Holcomb includes reducing state income tax from 3.23% to 2.9% over time and the previously announced automatic taxpayer refund that will bring in a total of $545 million. dollars to 4.3 million taxpayers, as required by state law when the state has a surplus.
The Indiana General Assembly passed a bill saying that even those who don’t owe income tax this year will get the refund.
Governor’s plan includes paying out $2.6 billion from Indiana state’s pre-96 teachers’ retirement fund at the end of this fiscal year and eliminating the tax on service receipts and the 30% business personal property tax floor for new equipment – something the National Federation of Independent Business lobbied the legislature to do this year.
Personal income taxes make up nearly 36% of total state revenue in Indiana, with sales tax contributing another 53% — the bulk.
Indiana is one of 43 states that have a state income tax, although only 41 states tax wages and salary income.
California has a rate of 13.3% and New York is at 10.9%, according to the Tax Foundation. If lowered to 2.9%, Indiana’s top state tax rate would be tied for the lowest with North Dakota, which already has a 2.9% rate.
Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming.
Until this week, Indiana seemed unlikely to cut taxes this year.
The Indiana House had passed a bill in January providing more than $1 billion in tax cuts and reducing the state income tax rate to 3%.
The Indiana Senate, however, removed the tax cut provisions from the bill, and Senator Rodric Bray, R-Martinsville, the leader of the Senate, said the Senate did not want to pass a tax cut. tax in a year without a budget.
The Indiana General Assembly passes a two-year state budget every two years. The budget bill that was passed last year, which forecasts state revenues and includes all expenditures, was passed while the state was still in a period of economic recovery after the measures taken during the COVID-19 pandemic.
Holcomb said he was confident the tax cut plan he agreed to “could be done responsibly” while balancing state priorities and “maintaining prudent levels of fiscal reserves.”
“The sooner we execute this plan, the sooner we can: make Indiana a state on par with the states with the lowest personal income tax rates among taxing states; help businesses of the city in their primary areas of concern – energy costs and the closing of new capital investments over time; significantly improving the state’s pension fund rankings; and maintaining Indiana’s low-debt status reads the governor’s statement.