Groups eye Indiana income tax removal with enthusiasm, apprehension; it brought in $8.1 billion in fiscal year 2022

Indiana Senate Republicans want to see if the state can ditch its individual income tax, and one influential economic policy group thinks the change couldn’t come sooner. For another, it’s a matter of how the state replaces the revenue source.

Individual income tax revenue was nearly 39% of Indiana’s total revenue haul in 2022, according to the Indiana State Budget Agency. A two-year blue ribbon commission from Sen. Travis Holdman, R-Markle, would review state and local taxes with a goal of eliminating the individual income tax within the decade.

That deletion is Americans for Prosperity-Indiana’s highest priority this legislative session, which began last week.

The conservative interest group said it wanted lawmakers to “simplify the tax code and eliminate the state income tax to allow Hoosiers to keep more of their hard-earned money” in a news release Wednesday. For more on Americans For Prosperity’s Indiana agenda go here.

The conservative-leaning Indiana Chamber of Commerce, meanwhile, said it saw potential in the idea but urged a responsible approach.

The tax brought in $8.1 billion in fiscal year 2022.

“It’s, I think, not feasible that you would eliminate that tax and not replace it with something else. That’s much too large of a portion of the revenues that go into the state general fund,” said chamber President and CEO Kevin Brinegar in a media call Wednesday.

“[The chamber’s position] depends on what you replace it with,” Brinegar said, adding that one of the blue ribbon commission’s primary tasks should be to find a replacement revenue source that could be “better for jobs and economic growth than imposing an income tax.”

That’s particularly attractive to prospective residents when combined with warm weather, like Florida and Texas, Brinegar said — but “it may not be as appealing in Indiana where we haven’t repealed winter yet.”

Americans for Prosperity also pushed lawmakers to take greater control of internal agency rulemaking, legalize marijuana, fund families to opt out of public schools and health care reforms that minimize government and insurance involvement.

The chamber, meanwhile, highlighted bills on economic development grants, energy planning, data privacy and tax breaks for pass-through business entities.

Brinegar also pleaded with lawmakers to “spend less time on peripheral social issues and more time on things that will move our state forward.”