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Indiana has the Twelfth Lowest State and Local Tax Burden in the Nation for FY 2016

May 08, 2018

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In Fiscal Year (FY) 2016, Indiana collected $25.5 billion in state and local taxes—or $3,842 for every man, woman, and child. 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?

 

To better answer this question, this analysis will calculate Indiana’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.

 

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Fortunately for taxpayers, as shown in Chart 1, Indiana’s state and local tax burden (tax collections divided by private sector personal income) was the twelfth lowest in the nation for FY 2016 at 12.7 percent—or -11 percent below the national average of 14.3 percent.

 

Chart 1 Indiana State and Local Tax Burden FY 2016.jpg

 

#Indiana state and local #taxburden in FY 2016 was the 12th lowest in the nation at 12.7%— -11% below US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #INlegis #INsen #INgov #PolicyData (click to tweet)

 

As shown in Chart 2, Indiana’s tax burden has increased over time by 61 percent to 12.7 percent in FY 2016 from 7.9 percent in FY 1950.

 

Chart 2 Indiana State and Local Tax Burden by Type of Tax FY 1950 to 2016.JPG

 

#Indiana state and local #taxburden has increased 61% between FY 1950 (7.9%) to 2016 (12.7%) http://bit.ly/2FX9C8F @keypolicydata #INlegis #INsen #INgov #PolicyData (click to tweet)

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

 

To put Indiana’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, Indiana’s 12.7 percent tax burden is greater than these combined industries: retail trade (6.3 percent), and construction (6 percent).

 

Chart 3 Indiana State and Local Tax Burden vs. Major Industry FY 2016.JPG

 

#Indiana state and local #taxburden > combined industries: retail and construction http://bit.ly/2FX9C8F @keypolicydata #INlegis #INsen #INgov #PolicyData (click to tweet)

 

Indiana’s lower than average state and local tax burden is helped by a low property tax burden (3.2 percent, 9th lowest).

 

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 20 Indiana counties with the highest local government tax burden include:

 

  • Lake County, IN (7.0 percent)
  • Benton County, IN (6.9 percent)
  • Howard County, IN (5.7 percent)
  • Cass County, IN (5.5 percent)
  • White County, IN (5.3 percent)
  • Putnam County, IN (5.2 percent)
  • Montgomery County, IN (5.2 percent)
  • Sullivan County, IN (5.2 percent)
  • Clinton County, IN (5.0 percent)
  • Fayette County, IN (4.9 percent)
  • Miami County, IN (4.9 percent)
  • Wayne County, IN (4.9 percent)
  • Union County, IN (4.9 percent)
  • Delaware County, IN (4.8 percent)
  • Vigo County, IN (4.8 percent)
  • Newton County, IN (4.8 percent)
  • Monroe County, IN (4.7 percent)
  • Madison County, IN (4.7 percent)
  • LaPorte County, IN (4.7 percent)
  • Warren County, IN (4.6 percent)

 

The 20 Indiana counties with the lowest local government tax burden include:

 

  • Washington County, IN (3.2 percent)
  • Owen County, IN (3.1 percent)
  • Wells County, IN (3.1 percent)
  • Porter County, IN (3.1 percent)
  • Ripley County, IN (3.1 percent)
  • Kosciusko County, IN (3.1 percent)
  • Johnson County, IN (3.1 percent)
  • Ohio County, IN (3.1 percent)
  • Lagrange County, IN (3.0 percent)
  • Floyd County, IN (2.9 percent)
  • Dubois County, IN (2.8 percent)
  • Rush County, IN (2.8 percent)
  • Whitley County, IN (2.6 percent)
  • Hamilton County, IN (2.6 percent)
  • Harrison County, IN (2.4 percent)
  • Jackson County, IN (2.4 percent)
  • Warrick County, IN (2.3 percent)
  • Boone County, IN (2.2 percent)
  • Franklin County, IN (2.2 percent)
  • Martin County, IN (-2.9 percent, see note)

 

Chart 4 Indiana Local Tax Burden by County FY 2016.JPG

 

Note: In Martin County most of the land is owned by the federal government via the Naval Surface Warfare Center Crane Division and Hoosier National Forest. This results in negative private sector income as most workers reside in surrounding counties.

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?

 

 

 

 


Category: Tax Burdens

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.


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