The Tax Foundation

Tax Data

Indiana

The Facts on Indiana’s Tax Climate

Here are some basic facts on Indiana’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 17 in Indiana
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Indiana taxpayers had to work until April 17 (ranked 29th nationally) to pay their total tax bill, six days before National Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are: Michigan, April 16 (ranked 31st nationally); Illinois, April 23 (ranked 16th nationally); Kentucky, April 10 (ranked 45th nationally); and Ohio, April 17 (ranked 28th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Indiana's State/Local Tax Burden Below National Average
Estimated at 9.4% of income, Indiana's state/local tax burden percentage ranks 28th highest, below the national average of 9.7%. Hoosiers pay $3,502 per capita in state and local taxes.
Indiana's State-Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

Indiana's 2008 Business Tax Climate Ranks 12th
Indiana ranks 12th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Michigan (29th), Illinois (28th), Kentucky (36th), and Ohio (46th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Indiana's Individual Income Tax System
Indiana's personal income tax system consists of a flat 3.4% rate on federal adjusted gross income (AGI). That rate ranks 3rd lowest among states levying an individual income tax. Indiana's 2005 individual income tax collections were $768 per person, which ranked 25th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Indiana's Corporate Income Tax System
Indiana's corporate tax structure consists of a flat rate of 8.5% on all corporate income. Among states levying corporate income taxes, Indiana's top rate ranks 13th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $165.34 per capita, ranking the state 17th highest among states that tax corporate income.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Indiana Levies Sales Tax Above National Median; Gasoline Tax among the lowest in the Nation
Indiana levies a 6% general sales or use tax on consumers, which exceeds the national median of 5.4%. State and local governments combined collected $1,163 per capita in general sales taxes in 2005, which ranks 31st highest nationally. Indiana's gasoline tax stands at 31.7 cents per gallon, which ranks 12th highest nationally. Additionally, the state's general sales tax is applied to gasoline purchases. Indiana's cigarette tax stands at 99.5 cents per pack of twenty, which ranks 26th highest nationally. The sales tax was adopted in 1933, the gasoline tax in 1923 and the cigarette tax in 1947.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Indiana Property Taxes: Comparatively High
Indiana is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Indiana's localities collected $6,064,615,000 in property taxes in fiscal year 2004, the latest year for which the Census Bureau has published state-by-state data. At the state level, Indiana collected $8,923,000 in property taxes during FY 2004, making its combined state/local property taxes $6,073,538,000. That brought its per capita property tax collections to $975, which ranked 26th highest nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Indiana is a Beneficiary State
Compared to the average state, Indiana taxpayers receive about the same federal funding per dollar of federal taxes paid. For every dollar of federal tax collected in 2005, Indiana citizens received approximately $1.05 in federal spending. This ranks the state 30th highest nationally and represents a significant rise from 1995 when Indiana received $0.84 in federal spending per dollar of taxes and ranked at 42nd nationally. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Michigan ($0.92), Illinois ($0.75), Kentucky ($1.51), and Ohio ($1.05).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Tax Data from The Tax Foundation