In Fiscal Year (FY) 2013, Indiana collected $25 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Indiana taxpayer can afford this level of taxation.
As shown in Chart 1 below, Indiana’s state and local tax burden (tax collections divided by personal income) was the twenty-third lowest in the nation for FY 2013 at 9.9 percent—this is -4 percent below the national average of 10.3 percent. As shown in Chart 2, Indiana’s tax burden has grown over time by 43 percent to 9.9 percent in FY 2013 from 7 percent in FY 1950.
Indiana’s lower than average state and local tax burden is driven by their low property tax burden (2.5 percent, 37th highest), corporate income tax burden (0.31 percent, 29th highest) and low all other taxes burden (1.9 percent, 28th lowest). However, Indiana does have a higher than average individual income tax burden (2.5 percent, 18th highest) and sales tax burden (2.7 percent, 17th highest) that partially offsets the lower tax burdens.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Indiana—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Indiana counties with the highest local government tax burden include: Lake County, IN (5.2 percent), Montgomery County, IN (4.2 percent), and Howard County, IN (4.1 percent). The Indiana counties with the lowest local government tax burden include: Franklin County, IN (1.8 percent), Martin County, IN (1.9 percent), and Rush County, IN (1.9 percent).
J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.