Indiana Approves Income Tax Reduction

Indiana Approves Income Tax Reduction

May 14, 2013

Indiana Governor Mike Pence (R) last week signed into law the state’s 2014-15 two-year budget. The approved budget keeps spending increases below inflation and cuts the state’s single-rate income tax, the corporate income tax, and eliminates the inheritance tax:

 

Current

2014

2015

2016

2017

Individual Income Tax

3.4%

3.4%

3.3%

3.3%

3.23%

Corporate Income Tax

7.5%

7.0%

6.5%

6.5%

6.5%

Inheritance Tax

Repealed, retroactive to Jan. 1, 2013

Repealed

Repealed

Repealed

Repealed

The corporate tax reduction preserves one enacted in 2011, but the others are new. Indiana’s well-structured income tax – broad-based and low-rate – gets ever closer to Pennsylvania’s lowest-in-the-country rate of 3.07 percent. (Pence had initially sought a larger reduction but ultimately negotiated these rates with legislative leaders.) The inheritance tax was being phased out by 2022, and the budget accelerates that to, well, now.

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