Indiana is a national leader in tax competitiveness, consistently ranking among the top states in the Tax Foundation’s 2024 State Business Tax Climate Index and earning praise from the Council on State Taxation for its tax administration. These accolades reflect decades of incremental improvements that have attracted billions in capital investment.
In 2025, incoming Gov.-elect Mike Braun’s administration and Republican leadership in both the House and Senate have signaled that property tax reform will be a top priority. Republicans will also hold slim majorities in Congress alongside a Trump White House, creating a rare moment of unified government. This convergence offers a significant opportunity to refine Indiana’s property tax system and strengthen its competitive advantage. With tax reform emerging as a key focus in Washington—particularly around expired or expiring provisions of the Tax Cuts and Jobs Act (TCJA) — this is the perfect moment for Indiana to align its policies.
Balancing Local Needs and Business Growth
While the state’s tax climate is already strong, adjusting how local governments are funded and how businesses and residents share costs requires careful consideration. Property tax reform will test lawmakers’ ability to balance competing demands. Residential taxpayers—who drive demand for local government services and vote in elections—want relief, while key industries to the state’s economy need a stable, growth-oriented tax environment. Policymakers must navigate these tensions, crafting equitable policies that preserve local funding while ensuring Indiana remains a magnet for investment.
One powerful lever for encouraging growth is lowering the burden of business personal property taxes. Steps like eliminating depreciation floors, exempting new investments, or increasing the de minimis exemption would lower the cost of capital and encourage the growth of capital-intensive industries like advanced manufacturing and life sciences. Although many of these types of capital investments are already incentivized by local governments, reforming the system would benefit all businesses, not just those making major capital commitments. According to a recent study released by the Indiana Chamber Foundation, these reforms could increase economic output and job creation.
Leveraging Federal Reforms to Boost State Success
Indiana’s opportunity does not stop at the state line. Key federal tax provisions from the TCJA—some of which have already expired—are set to be revisited by Congress. Decisions on research and development expenses, bonus depreciation, and the state and local tax deduction cap will shape the broader economic landscape. Aligning state tax changes with these national priorities could amplify the impact of Indiana’s reforms. For example, extending or enhancing bonus depreciation at the federal level would enhance state efforts to reduce effective tax rates on capital investments, further encouraging economic growth and innovation.
The current state tax environment supports a wide range of industries, yet manufacturing and life sciences are crucial to its long-term prosperity. Together, they produce a significant share of the state’s economic output and jobs, but they often shoulder disproportionately high effective tax rates. The first phase of the Indiana Chamber Foundation tax study highlighted the need to ease these burdens to remain competitive with other states. By refining policies to better support capital-intensive sectors, Indiana can attract new investments, retain existing businesses, and secure its standing as a Midwestern economic powerhouse.
Navigating Trade-Offs and Ensuring Stability
Reforming business personal property taxes presents trade-offs. Lowering tax burdens on capital-intensive industries could reduce local government revenues, which rely heavily on property taxes to fund services. Policymakers will need to explore alternative funding mechanisms, phased-in approaches, or revenue diversification strategies to ensure local governments can maintain service levels without losing the benefits of reform. Alternatively, local officials must explore the potential of existing opportunities enacted by the Legislature— such as local income tax, which has nearly $5 billion in unused capacity across the state. However, the long-term gains of a more vibrant economy must not come at the expense of local financial stability.
As the legislative session begins in 2025, Indiana stands at a threshold. The pursuit of smart property tax reform, coordinated with federal policy shifts, can deepen the state’s legacy of tax competitiveness. Policymakers now have the tools to secure Indiana’s role as a hub for advanced manufacturing and life sciences, protecting its existing economic base and welcoming new waves of capital. By acting decisively and strategically, Indiana can once again demonstrate why it is a national leader in fostering growth, innovation, and opportunity.