New Indiana law provides another round of tax relief

Another round of tax relief soon will be available to Indiana residents minus any change to the state’s fuel excise tax.

Gov. Eric Holcomb has signed into law a bill to provide relief from higher costs for goods and services.

State lawmakers reached agreement during a special session to address issues that include tax relief. House and Senate lawmakers voted to send the bill, SB2, to the governor’s desk after hashing out differences between the two chambers’ approved versions.

Sales tax cap

One provision in the new law agreed upon by legislators is a cap on the state’s 7% sales tax collected on gas purchases.

Indiana’s gas sales tax can be adjusted monthly. Change is dependent on the average Indiana retail price for gas.

The sales tax is set at 29.5 cents per gallon. The cap will keep the rate in place through June 2023.

However, if the sales tax rate falls below 29.5 cents during that time the lesser tax rate would apply.

Excise tax unaffected

The relief plan initially approved by senators included a state excise tax freeze. The excise tax on gas and diesel is adjusted annually.

On July 1, the state raised the 32-cent excise rate on gas by one penny to 33 cents. The 53-cent rate on diesel increased by 2 cents to 55 cents.

The Senate previously voted to revert the excise tax collected on gas and diesel to their June 30 rates.

The fuel tax freeze was estimated to reduce state revenue by about $47 million during fiscal year 2023.

To help compensate for the loss of available funds, the Senate called for appropriating $17.7 million from the state’s general fund to make transfers to counties, cities, and towns equal to the amount of excise tax that each locale would have otherwise received if tax rates were not frozen.

Alternative to excise tax relief

House lawmakers instead called for a tax rebate similar to a plan proposed by the governor.

Holcomb asked legislators to approve $225 rebate checks for all Hoosier taxpayers.

The final version approved by legislators and signed into law includes a $200 tax refund for all taxpayers.

Holcomb called tax rebates the “fastest, fairest and most efficient to return taxpayers’ hard-earned money during a time of economic strain.”

Another round of tax rebates

In May, the state began sending $125 rebate checks to every taxpayer or $250 to taxpayers filing jointly.

The rebate is a result of the state’s automatic taxpayer refund law. The law directs money back to residents following higher-than-expected state revenue for a fiscal year.

The governor followed suit in June by calling on state lawmakers to use $1 billion of the state’s reserves to provide another tax rebate. He said state reserves allow for the additional boost.

“Today, I proudly signed Senate Enrolled Act 2 to return $1 billion back to Hoosier taxpayers,” Holcomb said in a news release. “This fulfills what I set out to accomplish when calling the General Assembly into special session in order to help Hoosiers hurting from historically high inflation.” LL

More Land Line coverage of news from Indiana.