Individuals Vs Business Tax Splits

Individuals Vs. Business Tax Splits

Watchdog Indiana Home Page Tax And Budget Plans 2001-03

HOUSE BILL 1001 (SS) (as passed by the Indiana General Assembly during its special session on June 22, 2002): This bill is Taxpayer UNfriendly because it will increase revenues $1.7782 billion from July 1, 2002, through June 30, 2005. An assessment of the Pros and Cons for HB 1001 (SS) is listed next, after which a spreadsheet presentation of the individuals versus business tax split is presented.

House Bill 1001 (SS) PROS:

There is no individual income tax rate increase.
The homeowner property tax deduction increases effective 01/01/03 from $6,000 to $35,000 (the deducted amount will be the smaller of 50% of assessed value or $35,000) so the shelter allowance can be eliminated.
The school general fund property tax replacement fund credit increases from 20% to 60% effective 01/01/03.
The homestead credit increases to 20% (after property tax replacement credits are applied) effective 01/01/03. The homestead credit percentage would have changed from 10% to 4% on 01/01/04.
Property taxes will decrease. The pay 2004 property tax decreases (after the 2002 reassessment) are estimated to be 13.2% for agriculture, 12.8% for homeowners, 21.4% for commercial, 26.3% for industrial, and 28.8% for utility.
The earned income tax credit increases to 6% of the federal credit effective 01/01/03.
The renters deduction increases 25% (from $2,000 to $2,500) effective 01/01/04.
There is no new business franchise tax (or business activity fee).
There is no new payroll tax.
There is no new business supplemental tax.
The old administrative rules for business personal property assessment are reinstated beginning with the 03/01/03 assessment date. The 03/01/02 assessment uses the new rules, except that assessment of construction in process is at 10% of cost and the 35% inventory adjustment under the old rules apply.
The business supplemental net income tax is eliminated effective 01/01/03.
The corporate gross income tax is eliminated (except for utilities) effective 12/31/02.
Effective 01/01/03, the research expense credit is increased 100% (from 5% to 10%) and extended 2 years, and the apportionment factor is eliminated.
A new venture capital investment tax credit (capped at $10 million per year) is established at the lesser of 20% debt/equity capital or $500,000 effective 01/01/04.
Effective 07/01/02, there is $33 million allocated annually for local revenue sharing from the wagering tax revenue in the property tax replacement fund. This amount is to be distributed based on population to all counties that do not have a riverboat casino. Each county’s total must be divided based on population between the county and the cities and towns within the county.
State general spending increases are limited to 3.5% annually for fiscal years 2004 and 2005. Beginning with the 2006 fiscal year, spending increases are limited to the lesser of the six-year average increase in Indiana non-farm personal income or 6%. The Indiana non-farm personal income average increase from 1995-2000 was about 5.06%. The spending limit is applied to appropriations from the general fund, the property tax replacement fund, and the rainy day fund. The spending limit can be increased or decreased to account for new or reduced taxes, fees, exemptions, deductions, or credits adopted after 06/30/02.

House Bill 1001 (SS) CONS:

There is a net tax increase of $1.7782 billion from 07/01/02 to 07/01/05.
There is a 20% sales tax rate increase (from 5% to 6%) effective 12/01/02.
The gas tax increases 20% (from 15 to 18 cents per gallon) effective 01/01/03.
The business inventory tax will be shifted to all other property taxes through an increased rate. Manufacturing inventory (the 30% of total business inventory assessed value used in the production of finished goods that would qualify for an interstate commerce exemption) will be exempt from property taxes paid in 2004, 2005, and 2006. The shift to all other property taxes will be about $72.4 million in fiscal year 2004, $148.0 million in FY 2005, and $154.6 million in FY 2006. There will be a 100% business inventory assessed value deduction beginning with property taxes paid in 2007. The shift to all other property taxes will be about $354.2 million in FY 2007 and $562.9 million in FY 2008. About 51.8% of the business inventory tax shifts will be to homestead property. It is interesting to note that about 40 townships account for 80% of the total business inventory tax; homestead property taxes in these townships are likely to skyrocket!
Each county may provide a 100% business inventory assessed value deduction for property taxes paid in 2004, 2005, and 2006. Those counties that provide the 100% inventory deduction must use the county economic development income tax (CEDIT) for additional homestead credits. The CEDIT, COIT/CEDIT, and CAGIT/CEDIT rate caps can be exceeded by 0.25% in these counties. These counties that provide the 100% inventory deduction can continue the CEDIT after 2006 for additional homestead credits. If all counties start providing the 100% inventory deduction in 2004, the business inventory tax shift to all other property taxes will be about $241.2 million in FY 2004, $493.2 million in FY 2005, $515.5 million in FY 2006, $538.6 million in FY 2007, and $562.9 million in FY 2008. The effect of a county using the CEDIT for additional homestead credits is to shift some of the business inventory tax to the individual income tax instead of other property taxes.
The cigarette tax increases 258% (from 15.5 to 55.5 cents per pack) effective 07/01/02.
Some gambling winnings and some lottery proceeds will be subject to the individual income tax effective 07/01/02.
The corporate income tax rate increases 9.72% (from an effective rate of 7.747% to 8.5%) effective 01/01/03.
Business personal property no longer qualifies for the 20% property tax replacement credits effective 01/01/03.
The $37,500 assessed value credit against the state tax liability for business personal property (PPTRC) is eliminated effective 01/01/04.
There is a new utilities receipts tax (1.4% on gross receipts of retail activity) effective 01/01/03.
The riverboat wagering tax is increased and flexible boarding is allowed effective 07/01/02.

House Bill 1001 (SS) As Passed By Indiana General Assembly On June 22, 2002
General, Property Tax Replacement, And Highway Funds/Account Changes
(compiled July 3, 2002)
(amounts expressed in millions of dollars)

Description Of Revenue Increases From Individuals	FY 2003	FY 2004	FY 2005
Sales & Use Tax Rate Increase (from 5% to 6%) effective 12/01/02	267.2	548.4	562.6
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/03	224.6	455.4	467.7
Gas Tax Increase (from 15 to 18 cents per gallon, Note 17) eff. 01/01/03	36.1	72.9	74.2
School Transportation Fund PTRC Savings (see Note 3)	0.1	0.3	0.6
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $35,000	0.0	0.0	0.0
Individuals Revenue Increase Subtotal	528.0	1,077.0	1,105.1
Cigarette Tax Incr. (from $0.155 to $0.555 per pack) effective 07/01/02	268.2	293.5	295.0
Gambling Winnings Withholding (see Notes 13-14) effective 07/01/02	15.0	15.0	15.0
Lottery Taxation (for winnings that exceed $1,200) effective 07/01/02	3.9	3.9	3.9
Total Revenue Increase From Individuals	815.1	1,389.4	1,419.0
Description Of Tax Benefits For Individuals
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $35,000	0.0	0.0	0.0
School General Fund PTRF Credit Incr.(from 20% to 60%) eff. 01/01/03	(252.3)	(511.5)	(525.3)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/03	(161.5)	(335.7)	(353.1)
Homestead Credit Increase (20% after PTRC credits) effective 01/01/03	(77.7)	(248.8)	(351.9)
Earned Income Tax Credit Increase (to 6% of federal credit) eff. 01/01/03	(7.4)	(18.2)	(19.3)
Renters Deduction Increase (from $2,000 to $2,500) effective 01/01/04		(10.9)	(11.1)
Total Tax Benefit For Individuals	(498.9)	(1,125.1)	(1,260.7)
Total Net Revenue Increase From Individuals	316.2	264.3	158.3

Description Of Revenue Increases From Business	FY 2003	FY 2004	FY 2005
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/03	250.3	507.3	521.0
Sales & Use Tax Rate Increase (from 5% to 6%) effective 12/01/02	125.8	258.0	264.8
$37,500 Assessed Value PPTRC Elimination (see Note 7) eff. 01/01/04		96.0	97.9
Utilities Income Taxation Changes (see Notes 5-6) effective 01/01/03	29.1	59.9	61.7
SNIT Elimination / Corp. AGI Incr. (from 7.747% to 8.5%) eff. 01/01/03	28.6	58.9	60.7
Gas Tax Increase (from 15 to 18 cents per gallon, Note 17) eff. 01/01/03	12.0	24.3	24.8
School Transportation Fund PTRC Savings (see Note 3)	0.1	0.4	0.7
Business Revenue Increase Subtotal	445.9	1,004.8	1,031.6
Riverboat Wagering Tax Increase (see Notes 10-12) effective 07/01/02	290.4	314.6	339.8
Build Indiana Fund Cap On Riverboat Wagering Tax Distribution	128.7	128.7	128.7
Total Revenue Increase From Business	865.0	1,448.1	1,500.1
Description Of Tax Benefits For Business
Business Personal Property IN Rule Reduction/Elimination (Notes 8-9)	0.0	0.0	0.0
Inventory Tax Reduction/Elimination (see Notes 18-24)	0.0	0.0	0.0
School General Fund PTRF Credit Incr.(from 20% to 60%) eff. 01/01/03	(281.2)	(569.8)	(585.2)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/03	(124.8)	(259.5)	(273.0)
Corporate Gross Income Tax Elimination effective 12/31/02	(81.7)	(168.2)	(173.2)
Research Expense Credit (see Note 4) effective 01/01/03	(23.0)	(47.9)	(24.8)
21st Century Research & Technology Fund (see Note 16)	(15.0)	(15.0)
Venture Capital Investment Tax Credit (see Note 15) effective 01/01/04		(5.0)	(10.0)
Earned Income Tax Credit Increase (to 6% of federal credit) eff. 01/01/03	(1.3)	(3.2)	(3.4)
Business Tax Benefit Subtotal	(527.0)	(1,068.6)	(1,069.6)
Riverboat Admissions Tax Change (from flexible boarding) eff. 07/01/02	(38.0)	(36.2)	(34.4)
Total Tax Benefit For Business	(565.0)	(1,104.8)	(1,104.0)
Total Net Revenue Increase From Business	300.0	343.3	396.1

Grand Total Net Revenue Increase	616.2	607.6	554.4

Sources:
A. June 21, 2002, HB 1001 (SS) Fiscal Impact Statement from the Legislative Services Agency.
B. Individuals vs. Business tax split % from 04/25/02 Senate tax restructuring compromise handout.

Notes:
1. New PTRC is for real prop., mobile homes, and non-bus. pers. prop. with bus. pers. prop. excluded.
2. New PTRC Individuals vs. Business tax split estimate is 56.4% Individuals and 43.6% Business.
3. School Transportation Fund PTRC Savings split estimate is 47.3% Individuals and 52.7% Business.
4. Research Expense Credit increased from 5% to 10%, apportionment eliminated, extended 2 years.
5. Utilities Receipts Tax created at a rate of 1.4% on gross receipts of retail activity.
6. Utilities pay Corp. Adjusted Gross Income Tax, but no longer pay Supplemental Net Income Tax.
7. Existing $37,500 AV credit against state tax liability for personal property (PPTRC) is repealed.
8. Bus. Pers. Prop. assessed by new rules except 10% constr. in proc. & 35% inv. adj. (eff. 3/01/02).
9. Bus. Pers. Prop. assessment rules changed back to old rules in place before 3/01/02 (eff. 3/01/03).
10. Wagering Tax increase from 20% to 22.5% on Riverboats not implementing flexible boarding.
11. Wagering Tax graduated 15% to 35% (as AGR increases) for Riverboats with flexible boarding.
12. Wagering Tax Incr. is net amount after annual subtraction of $33 million for local revenue sharing.
13. Individual Adjusted Gross Income Tax on winnings of $1,200 or more from a slot machine play.
14. Individual Adjusted Gross Income Tax on net keno game winnings less wager of $1,500 or more.
15. Venture Capital Investment Tax Credit lesser of 20% debt/equity capital or $500,000.
16. $15 million from General Fund to 21st Century Research & Tech. Fund in FY 2003 and FY 2004.
17. Gas Tax Individuals vs. Business tax split estimated 75.0% Individuals and 25.0% Business.
18. Production inventory (30% of total inventory) exempt from property taxes paid in 2004, 2005, 2006.
19. Each county may provide a 100% inventory deduction for property taxes paid in 2004, 2005, 2006.
20. 100% inventory assessed value deduction beginning with 2006 (pay 2007) assessments.
21. Notes 18-20 will shift inventory property tax to all other property taxes through an increased rate.
22. Counties with 100% inv. ded. must use Cty. Econ. Dev. Inc. Tax for additional Homestead Credits.
23. CEDIT, COIT/CEDIT, CAGIT/CEDIT rate caps can be exceeded 0.25% by cty. with 100% inv. ded.
24. County with 100% inventory ded. can continue CEDIT after 2006 for additional Homestead Credits.

HOUSE BILL 1001 (SS) (as amended by the Senate Finance Committee on June 13, 2002): This bill is Taxpayer UNfriendly because it would increase revenues $1.0002 billion from July 1, 2002, through June 30, 2005.

House Bill 1001 (SS) As Amended By The Senate Finance Committee On June 13, 2002
General Fund And Property Tax Replacement Fund Changes
(compiled June 15, 2002)
(amounts expressed in millions of dollars)

Description Of Revenue Increases From Individuals	FY 2003	FY 2004	FY 2005
Sales & Use Tax Rate Increase (from 5% to 6%) effective 01/01/03	222.7	548.4	562.6
Individual Income Tax Increase (from 3.4% to 3.9% AGI) eff. 01/01/03	241.0	498.5	515.4
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/03	224.6	455.4	467.7
School Transportation Fund PTRC Savings (see Note 3)	0.1	0.3	0.6
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
Individuals Revenue Increase Subtotal	688.4	1,502.6	1,546.3
Cigarette Tax Incr. (from $0.155 to $0.455 per pack) effective 07/01/02	203.0	221.9	222.8
Gambling Winnings Withholding (see Notes 13-14) effective 07/01/02	16.1	17.2	17.2
Lottery Taxation (for winnings that exceed $1,200) effective 07/01/02	4.2	4.5	4.5
Total Revenue Increase From Individuals	911.7	1,746.2	1,790.8
Description Of Tax Benefits For Individuals
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
School General Fund PTRF Credit Incr.(from 20% to 100%) eff. 01/01/03	(420.5)	(852.4)	(875.5)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/03	(133.1)	(276.6)	(290.9)
Homestead Credit Maintenance (at 10%) effective 01/01/04	33.8	(14.0)	(98.3)
Renters Deduction Increase (from $2,000 to $2,500) effective 01/01/04		(12.5)	(12.7)
Earned Income Tax Credit Increase (to 4% of federal credit) eff. 01/01/03	(2.9)	(7.1)	(7.9)
Total Tax Benefit For Individuals	(522.7)	(1,162.6)	(1,285.3)
Total Net Revenue Increase From Individuals	389.0	583.6	505.5

Description Of Revenue Increases From Business	FY 2003	FY 2004	FY 2005
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/03	250.3	507.3	521.0
Sales & Use Tax Rate Increase (from 5% to 6%) effective 01/01/03	104.8	258.0	264.8
Business Supplemental Tax (new, see Notes 9-11) effective 01/01/03	37.7	95.3	98.1
Individual Income Tax Increase (from 3.4% to 3.9% AGI) eff. 01/01/03	42.5	88.0	91.0
$37,500 Assessed Value PPTRC Elimination (see Note 8) eff. 01/01/04		96.0	97.9
Utilities Income Taxation Changes (see Notes 5-7) effective 01/01/03	36.2	74.4	76.7
SNIT Elimination / Corp. AGI Incr. (from 7.747% to 8.5%) eff. 01/01/03	28.6	58.9	60.7
School Transportation Fund PTRC Savings (see Note 3)	0.1	0.4	0.7
Business Revenue Increase Subtotal	500.2	1,178.3	1,210.9
Riverboat Wagering Tax Increase (from 20% to 22.5%) eff. 07/01/02	46.3	47.9	49.6
Riverboat Admissions Tax Increase (from $3 to $4) effective 07/01/02	41.7	42.5	43.4
Total Revenue Increase From Business	588.2	1,268.7	1,303.9
Description Of Tax Benefits For Business
Business Personal Property IN Rule Elimination (see Note 12)	0.0	0.0	0.0
Inventory Assessed Value 100% Deduction (see Notes 15-16)	0.0	0.0	0.0
School General Fund PTRF Credit Incr.(from 20% to 100%) eff. 01/01/03	(468.6)	(949.8)	(975.4)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/03	(101.2)	(210.4)	(221.3)
Corporate Gross Income Tax Elimination effective 12/31/02	(81.7)	(168.2)	(173.2)
Research Expense Credit (see Note 4) effective 01/01/03	(23.0)	(47.9)	(24.8)
Venture Capital Investment Tax Credit (see Note 17) effective 01/01/04		(5.0)	(10.0)
Earned Income Tax Credit Increase (to 4% of federal credit) eff. 01/01/03	(0.5)	(1.3)	(1.4)
Total Tax Benefit For Business	(675.0)	(1,382.6)	(1,406.1)
Total Net Revenue Decrease From Business	(86.8)	(113.9)	(102.2)

Description Of Fund Transfers	FY 2003	FY 2004	FY 2005
Education Rainy Day Fund Transfer (new)	(50.0)	(50.0)	(50.0)
21st Century Research & Technology Fund Transfer	(25.0)
Total Net Fund Transfers	(75.0)	(50.0)	(50.0)

Grand Total Net Revenue Increase	227.2	419.7	353.3

Sources:
A. June 13, 2002, HB 1001 (SS) Fiscal Impact Statement from the Legislative Services Agency.
B. Individuals vs. Business tax split % from 04/25/02 Senate tax restructuring compromise handout.

Notes:
1. New PTRC is for real prop., mobile homes, and non-bus. pers. prop. with bus. pers. prop. excluded.
2. New PTRC Individuals vs. Business tax split estimate is 56.8% Individuals and 43.2% Business.
3. School Transportation Fund PTRC Savings split estimate is 47.3% Individuals and 52.7% Business.
4. Research Expense Credit increased from 5% to 10%, apportionment eliminated, extended 2 years.
5. Utilities Receipts Tax created at a rate of 1.5% on gross receipts of retail activity.
6. Utilities pay Corp. Adjusted Gross Income Tax, but no longer pay Supplemental Net Income Tax.
7. Utilities subject to the new Business Supplemental Tax.
8. Existing $37,500 AV credit against state tax liability for personal property (PPTRC) is repealed.
9. Bus. Supplemental Tax imposed on IN adjusted gross income of entities (except sole proprietors).
10. BST tax rate is 0.5% for taxpayers subject to Corp. Adjusted Gross Income Tax ($100 minimum).
11. BST tax rate is 1% for taxpayers subject to Individual Adjusted Gross Income Tax ($100 min.).
12. Business Personal Prop. assessment rules changed back to old rules in place before 03/01/02.
13. Individual Adjusted Gross Income Tax on winnings of $1,200 or more from a slot machine play.
14. Individual Adjusted Gross Income Tax on net keno game winnings less wager of $1,500 or more.
15. Establishes a 100% deduction for inventory assessed value effective 01/01/06.
16. Counties can levy extra Economic Dev. Income Tax for 100% inventory AV deduction eff. 01/01/03.
17. Venture Capital Investment Tax Credit lesser of 20% debt/equity capital or $500,000.

HOUSE BILL 1001 (SS) (as passed by the Indiana House of Representatives on June 6, 2002): This bill is Taxpayer UNfriendly because it would increase revenues a whopping $2.8212 billion from July 1, 2002, through June 30, 2005.

House Bill 1001 (SS) As Passed By The Indiana House On June 6, 2002
General, Property Tax Replacement, Transportation/Highway Funds Changes
(compiled June 14, 2002)
(amounts expressed in millions of dollars)

Description Of Revenue Increases From Individuals	FY 2003	FY 2004	FY 2005
Sales & Use Tax Rate Increase (from 5% to 6%) effective 12/01/02	267.2	548.4	562.6
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/04	(2.1)	228.6	467.7
Gas Tax Increase (from 15 to 18 cents per gallon, Note 7) eff. 01/01/03	36.1	72.9	74.2
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
Individuals Revenue Increase Subtotal	301.2	849.9	1,104.5
Cigarette Tax Incr. (from $0.155 to $0.55 per pack) effective 07/01/02	269.2	294.7	296.2
Riverboat Gambling Withholding (for winnings that exceed $600)	15.0	15.0	15.0
Lottery Taxation (for winnings that exceed $1,200)	4.1	4.1	4.1
Total Revenue Increase From Individuals	589.5	1,163.7	1,419.8
Description Of Tax Benefits For Individuals (see Note 3)
Shelter Allowance Elim./Homeowner Prop. Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
School General Fund PTRF Credit Incr. (from 20% to 32%) eff. 01/01/04	10.4	(127.8)	(280.2)
School Transport. Fund PTRF Credit Incr. (20% to 40%) eff. 01/01/04		(33.4)	(68.9)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/04		(171.8)	(350.9)
Homestead Credit Increase (see Note 8) effective 01/01/04	15.6	(302.7)	(660.4)
Renters Deduction Increase (from $2,000 to $4,000) effective 01/01/05			(44.4)
Earned Income Tax Credit Increase (to 8% of federal credit) eff. 01/01/03	(11.9)	(29.2)	(30.8)
Total Tax Benefit For Individuals	14.1	(664.9)	(1,435.6)
Total Net Revenue Increase From Individuals	603.6	498.8	(15.8)

Description Of Revenue Increases From Business	FY 2003	FY 2004	FY 2005
Eliminate Existing Prop. Tax Replacement Credit (all prop.) eff. 01/01/04	(2.3)	254.7	521.0
Sales & Use Tax Rate Increase (from 5% to 6%) effective 12/01/02	125.8	258.0	264.8
Utilities Gross Income Tax Changes (see Note 4) effective 01/01/03	49.5	102.0	105.0
Property Tax Add Back Re-institution (on non-agricultural property)	86.4	86.7	65.4
SNIT Elimination / Corp. AGI Incr. (from 7.747% to 8.5%) eff. 01/01/03	28.6	58.9	60.7
Gas Tax Increase (from 15 to 18 cents per gallon, Note 7) eff. 01/01/03	12.0	24.3	24.8
Personal Property Tax Credit Change (see Note 9) effective 01/01/05		(27.5)	34.0
State Police/IDEM/Continuing Education/Prop. Tax Rep. Licensing Fees	9.3	2.1	2.1
Business Revenue Increase Subtotal	309.2	759.2	1,077.7
Flexible Boarding/Graduated Wager Tax/Admission Tax Elim./BIF Cap	349.9	365.2	381.1
Pari-Mutuel Pull Tabs		5.3	5.3
Total Revenue Increase From Business	659.1	1,129.7	1,464.1
Description Of Tax Benefits For Business (see Notes 3 and 10)
Business Personal Property IN Rule Elimination (see Note 11)	0.0	0.0	0.0
Inventory Assessed Value Phase-Out (see Note 12)	0.0	0.0	0.0
School General Fund PTRF Credit Incr. (from 20% to 32%) eff. 01/01/04	11.6	(142.4)	(312.1)
School Transport. Fund PTRF Credit Incr. (20% to 40%) eff. 01/01/04		(37.2)	(76.7)
New 20% Property Tax Replacement Credit (Notes 1-2) eff. 01/01/04		(173.8)	(355.2)
Investment Tax Credit For New Personal Prop. (see Note 5) eff. 01/01/03	(41.5)	(76.6)	(73.2)
R&D Tax Credit Increase (5% to 10%, apportionment elim.) eff. 01/01/03	(23.0)	(47.9)	(51.5)
Earned Income Tax Credit Increase (to 8% of federal credit) eff. 01/01/03	(2.1)	(5.1)	(5.4)
Total Tax Benefit For Business	(55.0)	(483.0)	(874.1)
Total Net Revenue Increase From Business	604.1	646.7	590.0

Description Of Spending Decreases	FY 2003	FY 2004	FY 2005
Higher Education Operating Expenses Reduction	29.0
ISTEP Decrease (social studies test funding removed)	0.2	0.6	0.7
Medicaid Spending Cuts (see Notes 6)	10.1	13.5	13.5
Total Spending Decrease	39.3	14.1	14.2
Description Of Spending Increases
State Employee 2% Pay Raise (total increase in all affected funds)	(26.0)	(26.0)	(26.0)
Department Of Education Supplemental ADA Flat Grant	(35.0)
Department Of Education Allotment To Offset Reversion	(30.2)
Higher Education Technology Distribution	(10.0)
Tobacco Farmers Provisions	(4.7)	(4.7)	(4.7)
CHOICE In-Home Services Program	(4.7)
Project Safeplace/Youth Services Bureau/Domestic Violence Prevention	(1.8)
Indiana Commission On Health Care Excellence	(0.1)
Total Spending Increase	(112.5)	(30.7)	(30.7)
Total Net Spending Increase	(73.2)	(16.6)	(16.5)

Grand Total Net Revenue Increase	1,134.6	1,128.9	557.7

Sources:
A. June 6, 2002, HB 1001 (SS) Fiscal Impact Statement from the Legislative Services Agency.
B. Individuals vs. Business tax split % from 04/25/02 Senate tax restructuring compromise handout.

Notes:
1. New PTRC is for real prop., mobile homes, and non-bus. pers. prop. with bus. pers. prop. excluded.
2. New PTRC Individuals vs. Business tax split estimated to be 49.7% Individuals and 50.3% Bus.
3. Due date for changes in real property valuation delayed by 1 year until 03/01/03 payable CY 2004.
4. Utilities Gross Income Tax rate increased from 1.2% to 1.6%, Gross Income Tax credit eliminated.
5. Investment Tax Credit For New Personal Property is 30% first year and 20% second year.
6. OMPP is authorized to require a Medicaid recipient to select only one pharmacy.
7. Gas Tax Individuals vs. Business tax split estimated to be 75.0% Individuals and 25.0% Business.
8. Homestead Credit Increase to 30% beginning CY 2004 limited to first $1 million of a home's AV.
9. Personal Property Tax Credit on first $37,500 assessed value of inventory only.
10. Rental prop. eligible for prop. tax deduction of $5,000 for each multi-family dwelling complex unit.
11. Business Personal Prop. assessment rules changed back to old rules in place before 03/01/02.
12. Inventory AV Phase-Out 25% CY 2004, 50% CY 2005, 75% CY 2006, 100% CY 2007 and after.

MAY 22, 2002, HOUSE GOP COMPROMISE PLAN: This proposal is Taxpayer UNfriendly because it would increase revenues an astounding $1.6994 billion from July 1, 2002, through June 30, 2005.

House GOP Compromise Plan (05/22/02 proposal from House Republicans)
Changes To The State General Fund And The Property Tax Replacement Fund
(compiled May 27, 2002)
(amounts expressed in millions of dollars)

Description Of Revenue Increases From Individuals	FY 2003	FY 2004	FY 2005
Sales & Use Tax Rate Increase (from 5% to 6%) effective 07/01/02	489.9	548.4	562.6
Eliminate Existing Prop.Tax Replacement Credit (all prop.) eff. 01/01/04	(2.1)	230.7	467.7
Shelter Allowance Elim./Homeowner Prop.Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
Individuals Revenue Increase Subtotal	487.8	779.0	1,030.3
Cigarette Tax Incr. (from $0.155 to $0.55 per pack, Note1) eff. 07/01/02	294.9	296.0	297.7
Total Revenue Increase From Individuals	782.7	1,075.0	1,328.0
Description Of Tax Benefits For Individuals (see Note 2)
Shelter Allowance Elim./Homeowner Prop.Tax Deduct. Incr. to $30,000	0.0	0.0	0.0
New Prop.Tax Repl.Credit (real prop./mobile hms, Notes 3-4) eff. 1/1/04		(293.3)	(590.2)
Homestead Credit Increase (from 10% to 20%) effective 01/01/04	15.6	(130.3)	(300.2)
Renters Deduction Increase (from $2,000 to $3,000) effective 01/01/04			(22.2)
Earned Income Tax Credit Revision (to 3% of federal credit) eff. 1/01/03	(0.6)	(1.6)	(2.2)
Total Tax Benefit For Individuals	15.0	(425.2)	(914.8)
Total Net Revenue Increase From Individuals	797.7	649.8	413.2

Description Of Revenue Increases From Business	FY 2003	FY 2004	FY 2005
Eliminate Existing Prop.Tax Replacement Credit (all prop.) eff. 01/01/03	(2.3)	257.0	521.0
Sales & Use Tax Rate Increase (from 5% to 6%) effective 07/01/02	230.5	258.0	264.8
SNIT Elimination / Corp. AGI Incr. (from 7.747% to 8.5%) eff. 01/01/04	37.2	76.6	78.9
Business Revenue Increase Subtotal	265.4	591.7	864.7
Flexible Boarding/Graduated Wagering Tax/ Admission Tax Elimination	247.4	262.7	282.0
Pari-Mutuel Pull Tabs effective 07/01/02		5.3	5.3
Total Revenue Increase From Business	512.8	859.7	1,152.0
Description Of Tax Benefits For Business (see Note 2)
Old Bus. Pers. Prop. Assess. Rules Retained (except 30% depr. floor)	0.0	0.0	0.0
New Prop.Tax Repl.Credit (real prop./mobile hms, Notes 3-4) eff. 1/1/04		(336.0)	(676.3)
Inventory Tax Credit (100% refundable income tax credit) eff. 01/01/03	(223.3)	(412.2)	(386.0)
Corporate Gross Income Tax Elimination (except utilities) eff. 01/01/03	(94.7)	(195.0)	(200.8)
R&D Tax Credit Increase (5% to 10%, apportionment elim.) eff. 1/01/03	(24.8)	(51.5)	(51.5)
$37,500 Assessed Value PPTRC Retention effective 01/01/03		(27.5)	(5.4)
Earned Income Tax Credit Revision (to 3% of federal credit) eff. 1/01/03	(0.1)	(0.3)	(0.4)
Total Tax Benefit For Business	(342.9)	(1,022.5)	(1,320.4)
Total Net Revenue Increase From Business	169.9	(162.9)	(168.4)

Grand Total Net Revenue Increase	967.6	487.0	244.8

Sources:
A. May 22, 2002, House GOP Compromise Plan handout.
B. Individuals vs. Business tax split % from 04/25/02 Senate tax restructuring compromise handout.

Notes:
1. Includes a Tobacco Products Tax increase from 15% to 25%.
2. Reassessment delayed one year for real property.
3. New PTRC rates Ag 50%, Residential 35%, Commercial/Ind./Util. 20%, Non-Bus. Pers. Prop. 35%.
4. New PTRC Individuals vs. Business tax split estimated to be 46.6% Individuals and 53.4% Bus.

Watchdog Indiana Home Page Tax And Budget Plans 2001-03

This page was last updated on 03/19/10.