Deals expected on Indiana inheritance tax, tax refund

Back to TopCommentsE-mailPrintBookmark and Share

The Indiana Legislature's budget leaders have drawn close to agreements on plans for phasing out the state's inheritance tax and changing the automatic taxpayer refund championed by Republican Gov. Mitch Daniels so that it could only be triggered every other year.

The inheritance tax proposal would more than double the current exemption levels and then completely phase out over 10 years the tax that now brings in about $165 million a year.

The House and Senate are both considering plans to slightly raise the amount of money the state would need to have leftover in the bank to result in a tax refund.

The plan approved last year by legislators set that level at 10 percent of the state's planned spending. Half of the money above that threshold would go to taxpayers and the other half would be used to pay down teacher pension obligations, which threaten to cost the state more than $1 billion annually in the future.

The Daniels administration is projecting a surplus when the state budget year ends June 30 that would lead to perhaps a $50 per taxpayer credit to 2013 tax returns.

State Budget Director Adam Horst said the Daniels administration wants to keep the refund plan unchanged for this budget year but is open to changes in future years.

Legislators must agree to final versions of the proposals by the end of next week, when House and Senate leaders expect to adjourn this year's session. Budget leaders, however, have agreed to delay any changes until after the first possible round of refunds is determined this summer.

The legislative proposals eliminate the possibility of a refund every year in favor of it triggering only at the end of the state's two-year budget cycle. The House-backed plan would raise the required surplus to 12 percent, while the Senate version raises it to 14 percent.

Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, pointed out the $3 billion in budget adjustments Daniels made during the recession to balance the state budget would have amounted to a reserve of 22 percent.

The Senate proposal also would have $100 million in state reserves directed to pension fund obligations before any refunds are calculated, with the House plan would direct $200 million toward the refund before sending any additional money toward the pension fund.

"It's just hard for me to get over the idea that if you have a debt, you have to pay that before you declare a dividend for yourself," Kenley said.

Horst said the Daniels administration, however, believes enough money is already being dedicated to the future pension obligations.

Daniels advocated the refund plan, saying if the state's tax collections grow faster than expected it was better to give the money to taxpayers than have the state government spend it.

That plan has largely been embraced by the Republicans who control the House and Senate, but Democrats remain skeptical.

"I just don't think it's wise public policy," said Sen. John Broden, D-South Bend. "Even though the General Assembly is now involved in putting together some type of formula, I just think those issues should be addressed in the budgetary year."

The proposal for eliminating the inheritance tax starts by raising the exemption levels this summer.

The state now exempts inheritances of less than $100,000 to children and grandchildren and has a top rate of 10 percent for portions of estates topping $1.5 million. More distant family members and non-relatives face higher rates. Spouses pay no state inheritance taxes.

The new exemption level for close relatives would be $250,000, with a $25,000 exemption for others. The plan starts phasing out the tax on estates for those who die after July 1, with the tax being eliminated in 2022.

Estimates are that the state would lose about $60 million in revenue the first year and then an additional $10 million each year during the phase out. Horst said he believed the projected growth in state tax collections would cover the loss of the inheritance tax, which now accounts for about 1 percent of state revenue.


  • It is about time.
    When my mom was diagnosed with skin cancer a few years back she raised her life insurance, she beat it-thank God. Although she raised the payout, while I thought it might be a problem, I worried about how much of the inheritance I would actually get. I would have to pay for her burial and headstone, I would have to pay off her house... Although my brother and I would get the same amount, he is a minor and would go to live with his dad and I would be left with the bills. I have never agreed with having an inheritance tax, the money has already been taxed and there is no reason to tax it again. It was just the government's way of making free money. I think that it's about time that it was addressed.
  • It's not just for the rich
    The idea that this is only a benefit for the rich shows an astounding lack of knowledge.

    First, as PJ points out, the money has already been taxed once.

    Second, the rich are aware of the tax and can (and do) make monetary gifts to their kids over the course of years to minmize both gift tax and inheritance tax. Or they create trusts for their kids -- same result.

    Third, the current tax applies equally to everyone that inherits -- not just the wealthy. For example, I know a woman who is as poor as a churchmouse and always has been. Her mother, who had been a good saver all of her life, passed away, leaving her daughter with a sizable inheritance, upon which the tax was levied. The amount of the tax depends upon the size of the inheritance, not the personal wealth of the recipient.

    The reason the Left loves the class warfare schpiel is because they know many will buy into it emotionally without bothering to research the facts. A well-reasoned argument should be supported by knowledge.
  • Inheritance
    This law is most definitely needed for the inheritance tax situation. I am by no means wealthy and in fact will for sure have to pay any final expenses when my parents pass away, but the money which had previously been earned and previously taxed should not be taxed again upon someone's death. As for the Tax Refund, keep it and adjust the budgets accordingly! Why cut spending if there is a surplus. We as citizens have already paid the money in, use it wisely.
  • inheritance
    it sounds like some lawmakers, must be getting close to getting an inheritance. try passing something, we all can benefit from.
  • Don't create surplus by cutting out services to children, education or the needy
    Since the reduction in estate tax would be tied to surpluses, this may not objectionable unless the surplus is the result of cutting funds to education, childrens' services or the needy. Indiana's so-called budget "surplus" is the result of cutting funding for such services, as opposed to quality fiscal management.
  • Remarkable
    Nepotism at it's finest. I wouldn't be apt to call this out if it weren't for the fact that the same politicians removed the tax-exemption for employer education reimbursement. The federal government doesn't charge tax on tuition reimbursement, but our wonderful Republican leaders opted out. Apparently, helping individuals who help themselves is lower on the priority list than ensuring rich kids have an adequate grip on their predecessor's coat tails.

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com