Indiana state lawmakers have started looking into the possibility of eliminating the state’s income tax.
A task force of lawmakers and experts has been meeting at the Indiana Statehouse this summer to look at what a framework for eliminating the state’s income tax might look like. There have been supporters and naysayers of doing it.
Supporters say it would incentivize more businesses and people to move to Indiana because of fewer taxes to have to deal with. They also say it would put more money in the pockets of Hoosiers. Those against it are fearful it may leave the state in a similar state that Kansas was in for a long time after they eliminated their income tax.
For Ball State economist Dr. Mike Hicks, he sees both the benefits and what could be the detriments of eliminating the income tax.
“It’s always feasible to cut a tax, but there is always a price to be paid to do so,” he said to Indy Politics. “If it’s revenue neutral and we don’t change anything about the sales tax then we are talking about a 13 to 14 cent sales tax, up from 7 cents.”
In short, Hicks said that in order for the state to take in the same amount of money as before lawmakers would have to increase taxes in other areas in order to make up for the elimination of the income tax.
He acknowledged some of the benefits of doing that. Hicks said it would reduce compliance costs for businesses and potentially reduce administrative costs for government to maintain a sales tax.
But, Hicks has a hard time seeing what some supporters say about it. Particularly when it comes to the possibility that lower taxes will get more people to move to Indiana.
“In every state in the union, the population is moving to high tax places,” Hicks said. “It’s not because you like taxes. I can’t think of a single person who likes taxes. It really is a consequence of better public services that people do like. People do like good schools and good roads.”
All of which is paid for with higher amounts of tax money, he said. Hicks said eliminating the income tax without raising taxes elsewhere could end up slowing the economy because of a lack of quality public services, which he said is what happened in Kansas.
Lt. Gov. Suzanne Crouch, who is running for governor, came out in support of eliminating the state income tax last week.
5 comments
“In every state in the union, the population is moving to high tax places,” Hicks said.
Hicks is full of it! People are fleeing California and New York for places like Texas and Florida. Heck, Florida doesn’t even have income taxes! That seems awfully relevant to this conversation…
Have you driven on highways in Florida the last couple of years ? Many of the highways are tollroads. There are other fees and higher costs in Florida. They have clever ways of finding it somewhere else. Tourism is the number one business in the state of Florida. Believe It or not, tourism is the number one business in St. Josephl County, Indiana. Something to do with a golden dome and throwing a football around.
Correct, and the income from state income taxes would have to be replaced elsewhere, probably with a higher sales tax. I get that. The point is that people are moving to Florida, and Florida has the same tax setup we are evaluating and is certainly taxes at a lower rate than states people are fleeing from, like NY and CA.
I don’t have as much of an issue with use taxes where you pay for what you use as opposed to breathing taxes where you pay to be alive…property taxes too where you pay to live on your land and will never own it.
Well, yes. It is true that regarding taxes, Florida does not have a state income tax, which is one of the reasons why people are attracted to the state. Instead, Florida relies on other sources of revenue, such as sales taxes and property taxes. This tax setup may be more appealing to some individuals who prefer a system where they pay for what they use rather than a system based on income or other factors.
I think that we also need to note that tax policies can vary significantly between states, and individuals may have different preferences and opinions on the matter. And plus, we don’t want the economy to slow down, right?