A plan for gradually cutting Indiana’s individual income tax rate over the next seven years has been signed into law by Gov. Eric Holcomb.
The governor’s office announced Wednesday that Holcomb had signed the bill approved by legislators last week that will reduce the state’s current income tax rate of 3.23% to 2.9% in small steps until its planned full implementation in 2029.
The plan will cut the tax rate to 3.15% for 2023, which would amount to $40 savings for individuals or families with $50,000 in taxable income. Further reductions in 2025, 2027 and 2029 would occur if state tax revenue grows by at least 2% in the previous budget year.
Holcomb and state Senate Republican leaders for months resisted backing significant tax cuts sought by House Republicans, citing concerns about inflation and a possible slowdown in Indiana’s booming tax collections with the end of federal COVID-19 relief funding.
But that hesitancy faded away in the final weeks of the legislative session, with Holcomb saying ongoing strong tax revenue made him confident the state could afford the tax cuts.
Republicans rejected a call from Democrats for a suspension of the state’s 32 cents-a-gallon gasoline tax and the 7% sales tax on fuel, which Democrats argued would bring immediate savings to residents amid a national surge in gas prices.