Simplifying Indiana's Tax Code May Be Easier Said Than Done

Legislators are considering revamping the state’s tax code, and several lawmakers met Monday in a legislative study committee to gather input from the Indiana Department of Revenue.  Most seem to agree that the tax code should be simplified, but lawmakers say that’s easier said than done.

Indiana Department of Revenue Commissioner Mike Alley testified that many of the tax experts who took part in the governor’s tax conference earlier this year stressed the need to make the tax code less complex.  Alley says, for instance, there are about 35 tax credits and deductions available on individual income tax returns. He says last year 24 of those credits were used by less than 1,000 people -- out of more than 3 million people who filed tax returns.

“It has resulted in our income tax forms going from what used to be, 20 years ago, about two pages to 12 pages and our instruction booklet from about 15 pages to 63 pages,” Alley said.

Senate Tax and Fiscal Policy Committee Chairman Brandt Hershman says eliminating tax credits makes a lot of sense if lawmakers could agree on which ones to cut.

“Politically, it can be more difficult than it appears to make changes to individual credits or deductions because somebody’s always benefitting from them in some way,” Hershman said.

Alley says getting rid of the 24 underused credits and deductions would have no significant impact on state revenues.  Eliminating them would only generate about $2.7 million for the state out of a more than $4 billion tax base.