LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6727 NOTE PREPARED: Apr 1, 2025
BILL NUMBER: SB 451 BILL AMENDED: Mar 27, 2025
SUBJECT: Income Tax Rate.
FIRST AUTHOR: Sen. Holdman BILL STATUS: As Passed House
FIRST SPONSOR: Rep. Thompson
FUNDS AFFECTED:XGENERAL IMPACT: State
DEDICATED
FEDERAL
Summary of Legislation: The bill provides for a decrease in the Individual Adjusted Gross Income Tax rate
beginning in 2030 depending on certain conditions being met.
Effective Date: July 1, 2025.
Explanation of State Expenditures: State Budget Agency (SBA): The bill requires the SBA to calculate the
revenue growth for purpose of Individual Income Tax rate cut. The provision will have a minimal impact on
the SBA’s workload.
Department of State Revenue (DOR): The DOR will incur additional expenses to publish the tax rate related
information, revise tax forms, instructions, computer programs, and withholding tables to reflect the tax rate
related changes made by the bill. The DOR's current level of resources should be sufficient to implement
these changes.
Explanation of State Revenues: Individual Income Tax Rate: The bill could result in a revenue loss to the
state General Fund starting in FY 2030. The bill provides guidelines to the SBA to conduct a calculation at
the end of each even numbered fiscal year starting in FY 2028. The calculation will determine the percentage
of actual revenue growth in the amount of state General Fund revenues in four prior fiscal years and the
forecasted revenue growth in the fiscal year ending in the following calendar year. It provides for a reduction
of the state Individual Income Tax rate if the revenue collections calculated for all fiscal years are at least
3.5% above the revenue collections for the prior fiscal year. The calculation will be made at the end of each
even numbered fiscal year starting FY 2028 and ending FY 2040. The rate will be reduced by 0.05% in the
following even numbered year in which the calculation made by the SBA results in the thresholds being met.
The required threshold has not been met in the last twenty years. If the thresholds are met in the future, based
on the current level of income tax revenues, each 0.05 percentage point reduction of tax rate would result
in a decline of income tax revenues between $150 M to $200 M annually.
Under current law, Indiana imposes a flat income tax rate being phased down from 3.05% in 2024 to 3.0%
in 2025, 2.95% in 2026, and 2.9% in 2027 and years thereafter. Under the bill, assuming that the thresholds
SB 451 1 are met at the end of FY 2028 and FY 2030, the tax rate would be phased down from 2.9% to 2.85% for tax
year 2030 and 2031 and 2.8% for tax year 2032 and 2033. Tax rate decreases in future years will continue
to depend on the outcome of calculations conducted by the SBA at the end of each even numbered fiscal
year. Under the bill, the last decrement in tax rate could occur on January 1, 2042. Individual Income Tax
is deposited in the state General Fund.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: State Budget Agency; Department of State Revenue.
Local Agencies Affected:
Information Sources: State Revenue Forecast, December 17, 2024; OFMA Income Tax Database;
Legislative Services Agency, Indiana Handbook of Taxes, Revenues, and Apropriations, Fiscal Year
2024, https://iga.in.gov/publications/handbooks
Fiscal Analyst: Randhir Jha, 317-232-9556.
SB 451 2