Indiana Approves Income Tax Reduction May 14, 2013 Joseph Bishop-Henchman Joseph Bishop-Henchman 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Individual Income Tax 3.4% 3.4% 3.3% 3.3% 3.23% Corporate Income Tax 7.5% 7.0% 6.5% 6.5% 6.5% Inheritance Tax Repealed, retroactive to Jan. 1, 2013 Repealed Repealed Repealed Repealed The corporate tax reduction preserves one enacted in 2011, but the others are new.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. Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for State Tax Policy Indiana Estate, Inheritance and Gift Taxes Individual Income and Payroll Taxes