Income

Indiana lawmakers discuss ‘trigger’ for income tax cuts | News






INDIANAPOLIS (AP) — Proposed cuts to Indiana’s personal income tax rates may not be automatic under the methods legislative leaders discussed Monday.

A Republican-led push in the Indiana House for broad corporate and personal tax cuts is a major issue that remains as lawmakers seek to wrap up this year’s legislative session this week.

Senate Republican leaders have resisted major tax cuts now, citing concerns about the future of the economy even as state tax collections have taken big jumps over the past year. past year. Governor Eric Holcomb dropped his previous reluctance on tax cuts last week by proposing reductions in the state’s current personal income tax rate from 3.23% to 2.9% by small stages over the next seven years.

The head of the House Ways and Means Committee responsible for drafting taxes said Monday that discussions with senators may include a link between tax rate cuts and the strength of state tax collections.

A similar process is already in place for the state’s automatic tax refund that will result in payments of $125 to all Indiana taxpayers based on the size of the state government’s cash reserves. .

“We’re looking at – can we formulate this and put it into a step reduction that has trigger mechanisms?” said committee chairman Tim Brown, a Republican from Crawfordsville.

Holcomb’s income tax cut proposal would reduce state revenue by $900 million a year when fully implemented in 2028, according to the governor’s office. House Republicans also supported cutting several business taxes, potentially worth $700 million to $850 million a year.

The Senate budget chief said he remains more focused on taking action to reduce the state’s future teacher retirement obligations and recoup what now totals more than $1 billion. per year in state expenditure for these pensions.

“I would rather do something more transformative when we have that billion,” said Senate Appropriations Committee Chairman Ryan Mishler, a Republican from Bremen. “Instead of guessing the billion, I want to wait until we can actually get that billion and do some of these tax cuts. That’s my preference.

The proposed changes would make the state government even more dependent on its 7% sales tax, which is already its biggest source of revenue and the second highest rate in the country. Indiana’s personal income tax is currently lower than any surrounding state.

Republicans who dominate the House and Senate have rejected Democrats’ proposals for measures such as reducing the sales tax to 6.5%, increasing the state tax deduction on rent from 3,000 $ to $5,000 a year and the elimination of sales tax on diapers and tampons.

Democrats say the Republican proposals would perpetuate a “bad habit” of continuing to rely on sales tax with moves in recent years to cut corporate tax rates and eliminate estate taxes from the State.

Democratic Senator Tim Lanane of Anderson said the “highly volatile” global situation should lead to caution on major state tax changes until a new two-year budget is drafted in 2023.

“We don’t know what the economy will look like in 30 days, let alone a year,” Lanane said. “So I think the best approach is to wait until next year, when it’s a budget year.”