Cris Johnston, the director of the Indiana Office of Management & Budget, outlines details of the $1.2 billion in excess revenue that could come to Hoosiers in the form of a 2021 tax credit on July 14 in Indianapolis. Photo by Whitney Downard | CNHI Statehouse Reporter
INDIANAPOLIS — Millions of Hoosier taxpayers may see a small tax refund when they file next year after the state excess reserves hit $3.9 billion, triggering Indiana’s automatic tax credit.
The excess reserves come as Indiana reported $1.2 billion in additional revenue, which pushed the reserves over its statute limit of 12.5% of the budget. This came just one year after Indiana used $900 million in reserves to close a budget gap from the COVID-19 economic fallout.
“A year ago … the economic forecast report said they didn’t expect state revenues to return to 2019 levels until 2024,” said Cris Johnston, director of the Indiana Office of Management and Budget. “To be giving a taxpayer refund of this magnitude … we weren’t prepared to do that.”
Johnston said several factors helped the state recover more quickly than anticipated, including steady or growing employment, the federal money distributed to the state and direct stimulus payments to Hoosiers, which spurred local spending.
Half of the $1.1 billion extra in the reserves fund, or $545.3 million, will go to the Teacher Pension Stabilization Fund; the other half will be part of the automatic taxpayer refund.
Hoosiers who paid taxes in 2020 (and filed in 2021) and pay taxes in 2021 (filing in 2022) could see part of the $545 million in their tax refunds issued in 2022. However, the tax credit will only benefit Hoosiers wealthy enough to pay taxes in both years.
In 2012, the last time the automatic taxpayer refund was triggered, $360 million was distributed among taxpayers and averaged approximately $111 each. However, Johnston cautioned against extrapolating those numbers for 2022 because the number of eligible, tax-paying Hoosiers has changed in the last decade.
Most Republican leaders credited themselves for the change in the forecast, noting their constraint in spending during the 2021 budget session and beyond.
“Indiana has once again demonstrated what it means to exercise true conservative fiscal leadership,” Senate Pro Tem Rodric Bray, R-Martinsville, said in a statement. “Our state is thriving thanks to more than a decade of fiscal discipline that has brought us to this point, and now each and every taxpayer will benefit from it.”
House Speaker Todd Huston, R-Fishers, said in a statement, “… we’re going to jump at the chance to explore sustainable tax cuts and reforms next session.”
Across the aisle, Rep. Gregory Porter, D-Indianapolis, repeated his June and April statement for “human infrastructure spending,” calling it “an embarrassment of riches” for the state of Indiana as low-income Hoosiers continue to suffer.
He credited financial recovery efforts from the President Joe Biden administration and said revenue could keep growing if the “robust recovery” continued and federal legislation known as the “American Jobs Plan,” a Biden priority, passed. If so, Porter proposed more spending.
“After statutory excess reserve transfers, like the Pre-1996 Teacher Retirement Fund and the Automatic Tax Refund, Indiana will still be left with an embarrassment of riches that could be better used to help our state’s human infrastructure,” Porter said.
“I am proposing that at least $300 million be transferred to the Minority Health Trust Fund, and the remaining dollars be split between a teacher pay raise in the 2023 budget and student loan debt relief.”
© 2024 Community Newspaper Holdings, Inc.