Economy of Indiana - Fiscal Policy

Fiscal Policy

Indiana has a flat state income tax rate of 3.4%. Many Indiana counties also collect income tax. The state sales tax rate is 7%. Property taxes are imposed on both real and personal property in Indiana and are administered by the Department of Local Government Finance. Property is subject to taxation by a variety of taxing units (schools, counties, townships, cities and towns, libraries), making the total tax rate the sum of the tax rates imposed by all taxing units in which a property is located. However, a "circuit breaker" law enacted on March 19, 2008 limits property taxes to one percent of assessed value for homeowners, two percent for rental properties and farmland and three percent for businesses.

Indiana’s sales tax has, for most of the last 30 years, generated the largest share of tax receipts—49 percent FY 2010. No single tax has ever comprised 50 percent of the state’s total revenue. Indiana’s income tax became more important in producing revenue during the 1980s and 1990s. Its share of the revenue total has grown from about 25 percent to more than 40 percent in the late 1990s and early 2000s.

In Fiscal year 2011 Indiana reported one of the largest surpluses among U.S states, with an extra $1.2 billion in its accounts. Gov. Mitch Daniels, a Republican, on Friday authorized bonus payments of up to $1,000 for state employees. An employee who “meets expectations” will get $500, those who “exceed expectations” will receive $750 and “outstanding workers” will see an extra $1,000 in their August paychecks