MUNCIE, Ind. — State lawmakers have started looking into the possibility of eliminating the state’s income tax.
A task force of lawmakers and experts has been meeting at the Indiana Statehouse this summer to look at what a framework for eliminating the state’s income tax might look like. There have been supporters and naysayers of doing it.
Supporters say it would incentivize more businesses and people to move to Indiana because of fewer taxes to have to deal with. They also say it would put more money in the pockets of Hoosiers. Those against it are fearful it may leave the state in a similar state that Kansas was in for a long time after they eliminated their income tax.
For Ball State economist Dr. Mike Hicks, he sees both the benefits and what could be the detriments of eliminating the income tax.
“It’s always feasible to cut a tax, but there is always a price to be paid to do so,” he said to Indy Politics. “If it’s revenue neutral and we don’t change anything about the sales tax then we are talking about a 13 to 14 cent sales tax, up from 7 cents.”
In short, Hicks said that in order for the state to take in the same amount of money as before lawmakers would have to increase taxes in other areas in order to make up for the elimination of the income tax.
He acknowledged some of the benefits of doing that. Hicks said it would reduce compliance costs for businesses and potentially reduce administrative costs for government to maintain a sales tax.
But, Hicks has a hard time seeing what some supporters say about it. Particularly when it comes to the possibility that lower taxes will get more people to move to Indiana.
“In every state in the union, the population is moving to high tax places,” Hicks said. “It’s not because you like taxes. I can’t think of a single person who likes taxes. It really is a consequence of better public services that people do like. People do like good schools and good roads.”
All of which is paid for with higher amounts of tax money, he said. Hicks said eliminating the income tax without raising taxes elsewhere could end up slowing the economy because of a lack of quality public services, which he said is what happened in Kansas.
Lt. Gov. Suzanne Crouch, who is running for governor, came out in support of eliminating the state income tax last week.
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