January 13, 2015


State & Local Taxes in 2015


Indiana Tax Code Features

Progressive Features

• Provides a 9 percent refundable Earned Income Tax Credit (EITC)

• Sales tax base excludes groceries

Regressive Features

• Personal income tax uses a flat rate

• Comparatively low income tax exemptions

• EITC is not fully coupled to recent enhancements in the federal credit

• Fails to provide a property tax “circuit breaker” credit for low-income non-elderly taxpayers

• Fails to provide refundable child tax credits

• Fails to use combined reporting as part of its corporate income tax

Tax Changes Enacted in 2013 & 2014

• Reduced personal income tax rate (will fall from 3.4 to 3.23 percent by 2017)

• Reduced corporate income tax rate (will fall from 7.5 to 4.9 percent by 2017)

• Granted localities the power to eliminate business personal property taxes

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Indiana has the 10th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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