Two bills making their way through the General Assembly this session would make changes to the state’s inheritance tax, and its elimination may be the ultimate result.
The inheritance tax is levied on people who inherit money or property. Spouses and charitable organizations are exempt in Indiana. A Senate bill would lower the inheritance tax by about half as well as expand exemptions. But a House bill eliminates the tax entirely.
House Ways and Means chairman Jeff Espich says when the Senate bill comes up in his committee, he wants to amend the bill to include an elimination of the tax.
“I think the House version is much cleaner and easier to understand and implement,” Espich says. “And so, at least in terms of the phase-out mechanism of the House bill, I think that’s where we want to go.”
The phase-out eliminates the inheritance tax over a ten-year period. The estimated revenue loss for the state is $165 million per year, and counties share in that revenue stream.
Indiana Association of Counties legislative director Andrew Berger says the potential amount lost varies by county, but estimates say counties would lose, on average, $18 million to $20 million a year. Under the Senate bill, the loss would only be an average of $6 million to $8 million per year. Berger says his organization doesn’t necessarily oppose the elimination.
“County officials have no philosophical attachment to the inheritance tax,” he says. “It’s really just, if it’s going to go away, we need to find some way to replace the revenue.”
The final details of the bills will likely be worked out in conference committee later this session.
Monroe County benefitted to the tune of $312,000 last year from the inheritance tax. While the money represents only a small percentage of the county’s $29 million budget, County Council member Geoff McKim says it is still an important part.
“That revenue really does matter to Monroe County Government,” McKim says. “It’s more than the entire personnel budget of the treasurer’s department. It’s six sheriffs deputies.”
The proposed bill includes a formula designed to provide replacement funds for lost tax revenue but McKim says the formula is not favorable to Monroe County because it is based on years when the inheritance tax revenue was lower than average. McKim is also concerned the replacement fund may be cut from the bill entirely as legislators look for ways to reduce expenses.