Proposed legislation would make all military pay exempt from Indiana’s income tax, but the bill may have a rocky road through a session featuring several major tax reform proposals.
Military service members can currently exempt up to $5,000 of their pay from Indiana’s income tax. Lafayette Republican Senator Ron Alting’s bill would raise that exemption to 100 percent beginning in January 2015. The change would cut more than $36 million from state revenues, with that amount expected to increase each year.
But between the governor pushing for a phase out of the business personal property tax this session and recent shortfalls in state tax revenue, Alting admits his bill is not a guarantee.
“Well I’m a realist and I’ve been here for 16 years, so yes, it will be a struggle,” Alting said. “It will be a challenge, particularly with the budget not meeting our budget with the income in the state.”
Senate Appropriations Committee Chair Luke Kenley says the idea has merit but the timing is wrong.
“I’ve been trying to take the position that we shouldn’t pass any bills with a major current fiscal impact, including the governor’s bills,” Kenley said. “So we’re at a time when we’ve had to reduce our revenue forecast. The governor has had to make budget cuts for higher education.”
Kenley says it will be easier to consider Alting’s legislation next session, when the legislature will write a new budget.