Over the past few years, Indiana has set itself apart as a pro-growth, pro-jobs state. That’s included creating a tax system that keeps money flowing through our economy and allows families to save more of their hard-earned dollars. This year was no exception.
During the 2014 legislative session, the Indiana General Assembly approved a far-reaching tax plan under Senate Enrolled Act 1. This new law reduces the corporate income tax to 4.9 percent over six years, giving Indiana the second-lowest rate in the nation. It also provides local government units with three new options for reducing the tax on business property, so that communities can decide whether this tax cut is right for their citizens.
Additionally, SEA 1 created the Commission on Business Personal Property and Business Taxation, which will study issues related to Indiana’s overall business tax structure and how it affects Hoosier employers. The 14-member commission will examine the competitive advantages and disadvantages that companies may face from our taxes and then present a report on their findings by November.
While this study is a good place to start to ensure that our state’s taxes are meeting their goals and best serving all Hoosiers, it should not be the end of the story.
As any taxpayer knows, many state and local government units and programs are partially funded by Hoosiers’ paychecks. Typically, this is through taxes on income, sales, property and other related fees. The average Indiana citizen usually feels the burden of these taxes much more directly and more frequently than they do with our state’s business taxes. Business taxes do have an effect on the cost of goods and services, wages and rates, but when individual tax rates go up, taxpayers feel that impact immediately.
This is especially the case for Hoosiers who earn lower incomes. A small tax increase may not be especially significant to some taxpayers, but it can be a major blow to those earning between $7.50 and $9 per hour. That effect is maximized if these workers face cuts to their wages or hours.
Hoosiers deserve to know where and how their tax dollars are being used. With piecemeal changes made every year, Indiana’s tax code can cause confusion, and transparency can take a hit. Our taxpayers should have the assurance that they’re getting what they pay for, and to address that, the General Assembly – together with representatives from business, industry and other parts of state government – must conduct a comprehensive tax study.
That study should include a long-range plan for all of Indiana’s taxes, rather than simply reacting to short-term concerns. It’s our duty as a state to anticipate needs or changes to our taxes and to detect any cracks in the system. This tax commission should review everything from fiscal appropriations among our branches of government to how our schools are impacted by tax policy. The results will give our state leaders a clearer picture of what needs to change in future legislative sessions and help taxpayers understand how their paychecks are being used.
SEA 1 is a step in the right direction to keeping Indiana competitive and a great place to live. But we cannot stop there. A comprehensive tax study is the next necessary step to further improve our state and its citizens’ lives.