$1B tax-cut package clears Indiana House, heads to uncertain future in Senate

Indiana Statehouse (IBJ file photo)

Republicans in the Indiana House passed their $1 billion individual income and business tax-cut proposal Thursday on a 68-25 party-line vote, sending it to the Senate, where its future is murky.

House Bill 1002 is one of House Republicans’ flagship bills and authored by Ways and Means Chair Rep. Tim Brown, R-Crawfordsville. It would cut four separate taxes—individual income, business personal property, sales and the utility receipts tax.

HB 1002 would reduce the individual income tax rate from 3.23% down to 3% by 2026.

For the business tax cuts portion, it would 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.

In addition, the bill also would let businesses apply for a state income tax credit for taxes paid on existing business personal property where the 30% floor is still applied starting in 2025. The cost to the state for that would be $347 million in 2025 and $392 million in 2026.

Regarding the sales tax, the tax proposal would remove the double direct test applied in production sales tax exemptions, which could save businesses between $86 million and $249 million a year.

Democrats argued on the House floor on Thursday that generally the proposed cuts benefit corporations more than individuals, and said instead of cutting taxes, the state should prioritize investing that $1 billion  in other areas, such as funding child care access or paying for public school textbook fees.

“The choice you have to make today is do we once again reward those who are prospering the most … with even more tax cuts, or do we take that money and invest it in things that actually help working families?” Rep. Matt Pierce, D-Bloomington, said.

House Speaker Todd Huston, R-Fishers, spoke in favor of the proposal. He said Republicans and Democrats philosophically disagree on the issue of what investing in the state means.

Huston said the tax cuts are a “responsible down payment” on providing relief to taxpayers, and the state will continue to invest in responsible government programs. He added that government spending is not going to attract more people to the state.

“Who do we believe is a better steward of our money? Is it us? Or is it the people we represent?” Huston said.

HB 1002 will head to the Senate for consideration, where GOP leaders there are more hesitant about cutting taxes. Senate GOP leaders have urged caution on the issue to see how the state fares following an influx of federal pandemic relief dollars coming in, and concerns that inflation could slow consumer spending and sales tax collections.

The tax-cut discussion has been prompted by the state’s rosy financial condition. A December revenue projected state government would have a $5.1 billion reserve at the end of fiscal year 2022, and $4.1 billion after 2023.

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8 thoughts on “$1B tax-cut package clears Indiana House, heads to uncertain future in Senate

  1. Under the current state income tax rate, you pay $32.30 on every $1,000.00 of income. Under the tax cut plan backed by Rep. Todd Houston, by 2026 the tax would be $30.00 on a $1,000.00 – saving you a whopping $2.30 for every $1,000 of income. If the GOP was serious, why not get rid of the state income tax altogether so we can compete with states like Florida, Tennessee, and Texas?

  2. All I can say is there is no need whatsoever for the State to be hoarding 5 billion dollars. They always talk about having a rainy day fund. I get that……good idea to have such a fund. But justify for me all you taxing legislators, “why do you all think we need 5 billion dollars of what you apparently report as “surplus money”? Supposedly, in round numbers, our state says there are 7 million persons living in Indiana. Let’s also say for the sake of my example here that 5 million are working full time (40 + hours/week). $5,100,000,000 /5,000,000 = in round numbers, $1,000 refund across the board for all those working Indiana residents. I know, all will say we can’t possibly refund the entire 5.1 billion and that my arithmetic is flawed. OK so be it. You taxing lawmaker people out there, just simply send me my refund of $800.00. That will give you taxing people a still, very ample 1 billion dollars to place it wherever you ultimately arm wrestle over whether the taxpayers get, or don’t get there fair share of the surplus money back in our wallets.

  3. I’ve heard about this “rainy day fund” for many, many years now. What could possibly constitute a need for using this fund any worse that the complete shut-down of our economy in March of 2020?! I believe we needed to tap some of those funds during those times. I think we managed just fine with what we had…send the surplus back to the taxpayers!!

    1. Our legislators don’t think there is a future. Then again, most come from parts of Indiana that are losing population, so you have to understand their perspective.

      They look at our poorly rated schools and say, that’s fine. Those kids who will pay for their social security benefits don’t have to be smart to work in a distribution center or at Dollar General, and those teachers are overpaid anyway. How hard could teaching be?

      They look at our crumbling roads and go, that’s fine. We can always keep raiding Indianapolis for road money. Those people in Indianapolis aren’t real Hoosiers, despite the fact that Indianapolis is the economic engine of the state of Indiana.

      They look at our best and brightest moving to Indianapolis, or leaving entirely, and companies with good paying jobs passing over Indiana to locate elsewhere, and say that’s fine. We didn’t want their kind anyway, with their fancy high-paying jobs and potentially liberal workers.

      Besides, it’s not like anyone is paying attention that the federal government is the source of the influx of dollars that put them in this situation. But they will quickly tell you that you should vote for them, because all of Indiana’s problems are the fault of the big government liberals in Washington DC, and besides, we gave you a tax cut! Enjoy your extra $15 a month.

  4. The last president gave businesses enough tax breaks to last a lifetime.How does the republicans think the small towns and county’s can fund their budgets without these taxes?I will tell you how,tax you and me locally! Pathetic!!!

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