House Republicans unveil $1B tax cut plan; other GOP leaders are more reluctant

Indiana House Republicans unveiled a tax plan to eliminate or lower four separate taxes that would result in $1 billion in tax cuts by 2025.

On the chopping block are the sales tax, business personal property tax, individual income tax and the utility receipts tax. House Bill 1002 is being authored by House Ways and Means Chairman and lead budget writer  Rep. Tim Brown, R-Crawfordsville.

The legislation proposes the four separate taxes be modified as follows:

  • Reduce the individual income tax rate from 3.23% to 3% by 2026. The cut would be phased in over time and is expected to cost the state $87 million in revenue in 2023 and $366 million by 2025, according to the fiscal impact report on the bill by the Legislative Services Agency.
  • Exempt the minimum tax on business personal property after Jan. 1 for new equipment purchased by businesses, also known as the 30% depreciation floor. The law now requires businesses to pay a tax on at least 30% of the purchase price of machinery and equipment every year, even if the equipment is several years old and no longer worth 30% of its original cost. The change would shift the tax burden onto other taxpayers who pay property taxes, including homeowners, farmers and renters, according to the fiscal impact report. The impact would be $10 million by 2024, $34 million by 2025 and up to nearly $103 million by 2037.
  • A state income tax credit for taxes paid on existing business personal property starting in 2025, when the 30% depreciation floor is applied. The cost would be $347 million in 2025 and $392 million in 2026.
  • Remove the double direct test applied in production sales tax exemptions, reducing the sales tax revenue from businesses to between $86 million and $249 million a year.
  • Repeal the Utility Receipts and Utility Services Use taxes that consumers pay, with an estimated impact of $223 million in 2024.

House Republicans have been pushing for tax cuts in the past few months in light of Indiana raking in tax revenues that have greatly exceeded projections. Following the rosy December revenue forecast, lawmakers expect to have a $5.1 billion reserve at the end of fiscal year 2022, and $4.1 billion after 2023.

“The revenue forecast showed we have an abundance of resources. We need to be wise. We need to be prudent. But I think not to [cut taxes] now would be a mistake, too,” House Speaker Todd Huston, R-Fishers, told IBJ in December just before the session kicked off this month.

House Republican leaders have said the burgeoning surplus gave them even more cause to cut taxes, while Senate GOP leaders have still leaned to urging caution amid concerns that inflation could slow consumer spending and sales tax collections. Senate Republicans released their legislative priorities on Tuesday, with no mention of cutting taxes.

Gov. Eric Holcomb proposed the business personal property tax cut on new equipment in his 2022 agenda on Monday, saying it was a necessary move for the state to remain competitive on the business front, particularly in the equipment-heavy manufacturing sector.

He was hesitant on the idea of cutting other taxes, with his views aligning more with Senate leaders wanting to ensure the state has an accurate picture on where it stands financially following several rounds of federal pandemic assistance dollars coming in.

“That is the goal [to cut taxes] … I want to pay our bills, and we have some bills out there, and some new ones,” Holcomb said. “We’ll talk to folks and if we can be persuaded, we’re open-minded about this.”

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12 thoughts on “House Republicans unveil $1B tax cut plan; other GOP leaders are more reluctant

  1. Glad to see the fiscal conservatives aren’t reopening the budget in the middle of the cycle…

    I mean, surely they’re not doing this just so they can brag about cutting taxes as part of their re-election campaigns…

    1. If they cut taxes as proposed would it be factual for any of the legislators/senators who vote for the cuts to include that in their re-election campaigns….

    1. MS has a 5% state income tax rate… not sure what you are referring to. I’d rather see us go towards Texas, FL, TN with 0… or we could raise it like IL… they are doing fiscal and social wonders over there…

  2. Most, not all, educators at all levels will express panic about this. As will “non-producer” recipients of tax dollars. And media in the bag for large government. And of course leftist politicians. Hopefully, Indiana leadership can strike a balance between providing what contributes to growth, as well as human and physical infrastructure to sustain the excellent cost and quality of living Indiana residents enjoy, and empowering the business and private sector by keeping government as small and effective as possible. Indiana has some of the finest higher education institutions as any state … IU, Purdue, Ball State, ISU, and the University of Southern Indiana, as well as many excellent, private institutions such as Notre Dame, Butler, Manchester, and many others, not to mention Ivy Tech. We have one of the highest levels, if not the highest level of manufacturing employment per capita as any other state, and agribusiness flourishes in Indiana. The state of Indiana certainly has a lot going for it! Let’s keep it that way by encouraging sensible policies that foster and attract business and commerce, while supporting education at all levels … which is certainly more than “throwing more money at it”. Government is a business. “Public” business. We never get a fundamental metric all other businesses live and die by, namely Return On Investment (ROI). Tax payers would be much more supportive of public expenditures if metrics for ROI could be established and reported regularly.

    1. The future of manufacturing is automation, and IU/Purdue/BSU responded to the funding cuts back in 2007/2008 by admitting less in-state students and more out-of-state students.

      The idea that investing in the future is “leftist” is nonsense. What will draw businesses and residents to Indiana is great places with great schools and great infrastructure. The census numbers show it, the residents of Indiana are fleeing rural Indiana for the cities and suburbs.

      Tax cuts are an admission that rural Indiana has been abandoned by Indiana Republicans, that rural Indiana should just be bulldozed or turned into wind or solar farms for the rest of us.

  3. Indiana taxes a business to death, then they levy state income taxes, county income taxes, municipality taxes, and lately taxed additional amounts for the school systems on the property taxes. I should mention that the school systems are already getting more money than ever before yet Indiana ranks among the lowest performing students in the entire USA with 60+% failing in both English and Math. Pathetic.

  4. The article is missing the bit about the proposed HB1083 which would extend the sales tax to services provided as well. We’ll cut your taxes a little here, a little there, but you are going to pay a lot in the other thing we don’t want you to see. Hair cut, taxed. Cleaning service, taxed. Auto repair, lawn care, lawyer or accountant fees, taxed, taxed, TAXED. Bet they make up the billion cut in this alone.

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