Legislators Take Aim at Improvements to Indiana’s Tax System

We’re a month away from the start of the 2025 Indiana General Assembly Legislative session. This long session happens every two years and is when lawmakers consider the biennial State budget. However, it also means they have more time to consider many different issues between the start of January and the late April finish.

A new Governor and a few new faces at the legislature have people speculating about just what might be the top 2025 priorities. Property taxes are one issue we’re sure will be on the table. It got a lot of attention last year during the Governor’s race. Taxpayers across Indiana were concerned about their rising property tax bills.

The General Assembly decided it warranted a closer look and formed the bi-partisan State and Local Tax Review Task Force. This fall, they issued their final report. Top lawmakers have promised legislators will address significant property tax relief for Hoosiers in the upcoming legislative session.

The task force developed six broad recommendations for property taxes. They included recommendations like enacting more effective controls on property tax bills, particularly for homesteads; a credit for all eligible over 65 property taxpayers to ensure a reduction on their property tax bill; and refining the agricultural land base rate methodology.

Additional recommendations include increasing the de minimis business personal property tax exemption to help small businesses, reducing the 30% floor for all business personal property, and making progress towards a transparent and accountable property tax system that enables taxpayers to see a reduction in their property tax bill when their local unit reduces its tax rate.

So, what does that all mean? Will I receive property tax relief? And if so, when? All great questions. So far, there are very few clear answers. We do know that no matter what happens, it won’t impact your 2025 tax bills. Those bills will be out long before the General Assembly decides on any changes. 2026 could be a different story.

The recommendations are broad, and the devil will be in the details. As proposals roll out, the real debate will begin. Local governments and schools rely on property taxes to fund their operations. They will argue that any reductions will adversely impact their ability to deliver essential services.

Some may also argue about the need for significant reform. The Tax Foundation recently released its 2025 State Tax Competitiveness Index, which helps us examine how states compare with each other. It comes from the world's leading nonpartisan tax policy educational organization and has earned a reputation for independence and credibility.

So, how did Indiana do? It's not too bad. Overall, Indiana came in at ten. Our neighbors didn’t fare as well, with Michigan at fourteen, Kentucky at twenty-two, Ohio at thirty-five, and Illinois at thirty-seven. Diving deeper into specific taxes, Indiana ranked eighth in corporate taxes, sixteenth in individual taxes, seventeenth in sales taxes, thirteenth in unemployment insurance taxes, and fifth in property taxes. Fifth is pretty good. 

Property taxes are getting all the attention because they appeal to voters. Historically, elections have been lost because of rising tax bills and won on the promise of reducing property taxes. 

Will this session produce the kind of comprehensive reforms needed to reimagine how we pay for our state and local government needs? Or will lawmakers nibble around the edges to appease the demands of those complaining about their rising property tax bills?

Taxes are complicated, and there are no easy answers. We all want to pay less taxes, but at the same time we all want great services. Every change impacts someone somewhere. I hope that the state and local governments can work together on solutions. Buckle up; the serious debate is about to begin.