Research Areas
Indiana
The Facts on Indiana’s Tax Climate
Last updated July 1, 2009
Here are some basic facts on Indiana’s tax system and how it compares to other states:
Tax Freedom Day Arrives on April 8 in Indiana
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, Indiana taxpayers had to work until April 8 (ranked 28th nationally) to pay their total tax bill, five days before National Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states are: Michigan, April 10 (ranked 24th nationally); Illinois, April 13 (ranked 15th nationally); Kentucky, April 3 (ranked 41st nationally); and Ohio, April 11 (ranked 21st nationally).
Full study of Tax Freedom Day, nationwide and in each state
Indiana's State/Local Tax Burden Below National Average
Estimated at 9.4% of income, Indiana's state/local tax burden percentage ranks 28th highest, below the national average of 9.7%. Hoosiers pay $3,502 per capita in state and local taxes.
Indiana's State-Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008
Indiana's 2010 Business Tax Climate Ranks 12th
Indiana ranks 12th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Michigan (17th), Illinois (30th), Kentucky (20th), and Ohio (47th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)
Indiana's Individual Income Tax System
Indiana's personal income tax system consists of a flat 3.4% rate on federal adjusted gross income (AGI). That rate ranks 39th highest among states levying an individual income tax. Indiana's 2006 individual income tax collections were $795 per person, which ranked 29th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita
Indiana's Corporate Income Tax System
Indiana's corporate tax structure consists of a flat rate of 8.5% on all corporate income. Among states levying corporate income taxes, Indiana's top rate ranks 11th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $156 per capita, ranking the state 26th highest among states that tax corporate income.
50-State Table of Corporate Income Tax Rates
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household
50-State Table of State Corporate Income Tax Collections Per Capita
Indiana Levies Sales Tax Above National Median
Indiana levies a 7% general sales or use tax on consumers, which exceeds the national median of 6%.State and local governments combined collected $849 per capita in general sales taxes in 2006, which ranks 24th highest nationally. Indiana's gasoline tax stands at 29.7 cents per gallon, which ranks 16th highest nationally. Additionally, the state's general sales tax is applied to gasoline purchases. Indiana's cigarette tax stands at 99.5 cents per pack of twenty, which ranks 28th highest nationally. The sales tax was adopted in 1933, the gasoline tax in 1923 and the cigarette tax in 1947.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales Tax Collections Per Capita and Per Household
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita
Indiana Property Taxes: Comparatively High
Indiana is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Indiana's localities collected $1,337.60 per capita in property taxes in fiscal year 2006, the latest year for which the Census Bureau has published state-by-state data. At the state level, Indiana collected $1.21 per person during FY 2006, making its combined state/local property taxes $1,338.80, which ranks14th highest nationally.
State property tax collections per capita by state
Federal Tax Burdens and Expenditures: Indiana is a Beneficiary State
Compared to the average state, Indiana taxpayers receive about the same federal funding per dollar of federal taxes paid. For every dollar of federal tax collected in 2005, Indiana citizens received approximately $1.05 in federal spending. This ranks the state 30th highest nationally and represents a significant rise from 1995 when Indiana received $0.84 in federal spending per dollar of taxes and ranked at 42nd nationally. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: Michigan ($0.92), Illinois ($0.75), Kentucky ($1.51), and Ohio ($1.05).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state
