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Study: Indiana Taxes Disadvantage Low-Income Groups

A report suggests that the state's new tax structure might hurt middle to low income groups.

Department of Revenue

Photo: Dan Goldblatt/WFIU-WTIU News

The study argues Indiana’s income, sales, property and excise taxes, the effective tax rate means low-income Hoosiers pay two and a half times more than high-income people.

A new study from a national research group suggests Indiana’s overall tax structure is disadvantageous to middle- and low-income Hoosiers.

The report from the Institute on Taxation and Fiscal Policy says, taking into consideration Indiana’s income, sales, property and excise taxes, the effective tax rate means low-income Hoosiers pay two and a half times more than high-income people. Indiana Institute for Working Families senior policy analyst Derek Thomas says there are ways to remedy the disparity, including changing the state’s flat income tax system.

“One thing that we recommended was enacting a $25,000 no-tax floor so that families making below that amount owe no taxes,” Thomas says.

Indiana Senate Tax and Fiscal Policy chair Brandt Hershman suggests the study may be biased, saying Indiana’s tax climate is one of the most attractive in the country. And he absolutely rejects enacting a tax floor.

“I’m not trying to punish the poor but I think everybody ought to contribute something to the operations of the government services that they use,” says Hershman.

Hershman also cited the benefits of the state’s existing sales tax exemptions for food and medical costs.

Brandon Smith, IPBS

Brandon Smith, IPBS has previously worked as a reporter and anchor for KBIA Radio in Columbia, MO, and at WSPY Radio in Plano, IL as a show host, reporter, producer and anchor. Brandon graduated from the University of Missouri-Columbia with a Bachelor of Journalism in 2010, with minors in political science and history. He was born and raised in Chicago.

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