February 15, 2005
"Temporary" Income Tax Hike Would Hurt Indiana Tax Climate
WASHINGTON, D.C.—Governor Mitch Daniels' proposal to impose an income tax surcharge on Indiana taxpayers threatens to worsen the state’s business tax climate according to a new analysis by the Tax Foundation.
"The tax changes promoted by Governor Daniels would damage Indiana’s competitive standing relative to its neighboring states," said Chris Atkins, co-author of the analysis and Staff Attorney with the Tax Foundation.
Under the proposal Indiana’s ranking in the Tax Foundation's annual State Business Tax Climate Index would fall seven spots from 12th to 19th best in the nation.
Gov. Daniels proposed the tax increase during his first State of the State address. The proposal would enact a “temporary” 4.4 percent income tax bracket for Indiana taxpayers with incomes above $100,000 per year. The tax hike would raise approximately $290 million a year.
"Gov. Daniels is undoubtedly sincere in his intent to let this new tax expire after one year," said Atkins. "But savvy taxpayers know that many a 'temporary' tax hike has settled in, gotten comfortable, and made itself 'indispensable'".
However, the analysis notes that Daniels may have left himself an escape route. Having promised to put the new tax revenue in the state’s rainy day fund, creating no new spending obligations, he will have an easier time backing away from his controversial proposal.
The annual State Business Tax Climate Index rewards state tax codes that are neutral and create a “level playing field” for economic activity, have moderate tax rates, and do not have burdensome compliance rules.
The Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization based in Washington, D.C.
(Read the full analysis here).
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Media Contact: Bill Ahern (202) 464-5101
