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 inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. and cuts the state’s single-rate income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. , the corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. , and eliminates the inheritance taxAn inheritance tax is levied upon an individual’s estate at death or upon the assets transferred from the decedent’s estate to their heirs. Unlike estate taxes, inheritance tax exemptions apply to the size of the gift rather than the size of the estate. :
|
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Repealed, retroactive to Jan. 1, 2013 |
Repealed |
Repealed |
Repealed |
Repealed |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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