Currently, there is a personal exemption of $1,000 for adults, $1,500 for dependent children and an additional $1,000 for those over 65. If the rate of inflation was 2 percent, those figures would rise to $1,020 for adults, $1,530 for dependent children.
How much is this worth to the taxpayer? Assume a family of four, two adults under age 65 and two children. Currently they get a total exemption of $5,000. This would rise to $5,100.
At today’s income tax rate (3.4 percent), this $100 added exemption would be worth $3.40 to that household. For some in our state, any reduction in taxes is valuable as a means of cutting back government.
Instead of playing games with rates and exemptions, plus changing the tax base for personal property taxes, the General Assembly ought to be working on a comprehensive review of Indiana’s tax policies. Rather than a piecemeal approach to taxation, let’s look at the larger picture of revenue needs and the means of supporting, rather than undercutting, government services.
Morton Marcus is an independent economist, writer and speaker. Contact him at firstname.lastname@example.org