Indiana lawmakers are going to have to try harder if they really believe excess state revenue should be returned to Hoosier taxpayers.
Data released Friday by the State Budget Agency show Indiana can cover the entire 2023 budget year cost of the highly touted tax cuts approved in March by the Republican-controlled General Assembly using just the state’s extra revenue from February and March.
Last month, Indiana took in $1.46 billion in revenue, including $732.8 million in sales tax receipts, and $537.2 million in individual income tax payments, data show.
That total was $167.9 million, or 13%, more than anticipated by the state revenue forecast revised in December, as well as $224 million, or 18.1%, greater than the monthly revenue estimate used by state lawmakers in April 2021 as they crafted the two-year, $37.4 billion state spending plan.
The March result follows a February that saw Indiana beat its revised monthly revenue expectations by $136.1 million, or 13.6%, giving Indiana $304 million in excess revenue in just the last two months.
The nonpartisan Legislative Services Agency estimates the new tax cuts will cost Indiana $300.1 million during the state budget year that begins July 1.
Applying the February and March excess to that expense still leaves Indiana with $1.2 billion in extra revenue for the current budget year before tallying the state’s April, May and June receipts that typically outpace most other months.
Indiana also is projected to end the current budget year June 30 with $5.1 billion in its budget reserve, or 28.9% of 2023 state spending, notwithstanding an extra deposit of $545.5 million in a teacher pension account and using another $545.5 million to provide Hoosiers an automatic taxpayer refund.
Hoosiers should begin receiving their $125 automatic taxpayer refund payments later this month, or in early May, after the General Assembly last month approved Senate Enrolled Act 1 making all adults eligible for the payment, instead of only Hoosiers who pay income tax.
The $125 payment isn’t connected to the new tax cuts. But for most Hoosiers it will be more money than they’ll get from the tax law House Speaker Todd Huston, R-Fishers, falsely claimed is “the largest tax cut in state history.”
The only tax savings Hoosiers will see this year is the elimination of the utility receipts tax beginning July 1. That’s a 1.46% charge paid by both businesses and consumers on a portion of their electricity, natural gas, water, steam, sewage and telephone bills.
The biggest savings generally will go to big businesses since they tend to be the biggest users of utility services. A Northwest Indiana resident paying $100 a month to NIPSCO for electricity and natural gas will see their bill drop by about $1.
A $50 monthly phone bill may only go down a few pennies because of how different communications services are bundled and taxed.
Hoosiers, in theory, will know how much less they’re paying if they read the fine print at the bottom of their bills, even if they barely notice the reduction amid surging commodity prices driving up their overall utility costs.
The General Assembly has mandated utility providers note on the two bills following repeal of the utility receipts tax — in August and September, just ahead of the Nov. 8 general election — exactly how much each customer has saved because House Enrolled Act 1002 was adopted by the Legislature.
The other tax cut in the measure is a reduction in the individual income tax rate to 3.15%, from 3.23%, beginning Jan. 1, 2023.
That change will shrink the total state income tax paid by a Hoosier worker earning $50,000 a year to $1,575, instead of $1,615, an annual savings of $40, or about $1.54 more money in each biweekly paycheck.
Altogether, the legislation potentially drops the state income tax rate to 2.9% over a seven-year period so long as Indiana meets certain revenue and pension funding targets.
If fully implemented, the annual income tax savings for a $50,000 a year worker would amount to $125 a year beginning in 2029.
GOP lawmakers last month rejected a Democratic plan to drop both tax cuts in favor of pausing the collection of Indiana’s 32 cents per gallon gasoline tax and the state’s 7% sales tax on gasoline (approximately 22 cents per gallon) to immediately save Hoosiers money with fuel prices continuing to top $4 per gallon.