Indiana 10th Worst for Regressive Taxes

Photo credit: John E. Kashe/morguefile.

By Mary Kuhlman

Indiana's poorest residents are paying almost twice the amount of taxes than do the top 1 percent of earners, according to a recent report.

The study from the Institute on Taxation and Economic Policy found that the state takes a much greater share of income from middle- and low-income families than from the wealthy. Meg Wiehe, the institute's state policy director, said changes in tax policies could help solidify the state budget.

"If you have a state tax system that hitches its wagon to those at the very bottom whose incomes are stagnant or even declining, rather than taking an adequate share from those at the top who are seeing their incomes growing," she said, "there could be major consequences for the state's ability to raise adequate revenue."

As a share of family income, the report found that Indiana's lowest 20 percent of earners pay 12 percent in state and local taxes, yet the top 1 percent pay about 6 percent.

Wiehe said Indiana ranks 10th on her institute's Terrible 10 list for states that are high-tax for the poorest and low-tax for the wealthiest.

"One of the common traits of the states that make it on the Terrible 10 list are states that have an income tax," she said, "but the income tax is barely progressive, and for Indiana that's primarily because they have a flat-rate structure."

Indiana's flat income tax rate is 3.4 percent. Wiehe said that, along with the reliance on sales tax, excise and property taxes, place an unfair burden on the state's poorest families.

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