By Timothy Cox
The Statehouse File
INDIANAPOLIS – The Senate Appropriations Committee delayed action Thursday on legislation that would change the state’s automatic taxpayer refund law so that Hoosiers didn’t receive any cash back this year.
Appropriations Chairman Luke Kenley, R-Noblesville, said the issue needs more debate before lawmakers decide how to move forward.
Sen. Lindel Hume, D-Princeton, raised questions Thursday about the state's taxpayer refund program. Photo by Lesley Weidenbener, The Statehouse File.
Among the questions:
- Should changes to the refund law be delayed one year so taxpayers could get some money back soon?
- Should the state keep all its money to handle upcoming expenses, including higher Medicaid costs that could come in 2014 with implementation of a federal health care law?
- Should lawmakers try a new approach, such as switching to a new income tax system with a rate that fluctuates depending on the economy?
The debate comes just months after the General Assembly – pushed by Gov. Mitch Daniels – passed a law that provides an automatic refund to taxpayers when the balance in the state’s checking and reserve accounts reaches more than 10 percent of annual state spending.
Lawmakers thought it would be years before the law could be used. But cuts imposed by the Daniels administration and the General Assembly combined with a Department of Revenue mistake that put $320 million into the checking account mean taxpayers could see refunds at the end of this year.
Some of those cuts came in the area of education and lawmakers now are worried about providing tax cuts when schools are struggling.
“The last thing we wanted to cut…was the K-12 funding even the harshest critics didn’t want to go there,” Kenley said.
So he proposed legislation to change the taxpayer law.
“We have this incredible turnaround from last April when we passed our budgets and we go from telling everybody, ‘Gee, we’re sorry we don’t have any money. Just take it and live with it,’ to, all of a sudden, now we’re going to give money back to taxpayers,” Kenley said.
Under current law, the refund would mean about $55 per taxpayer and Hoosiers would claim it on their income tax returns. Some lawmakers fear returning the money to taxpayers when the state has made so many cuts to deal with the recent economic downturn.
Sen. Pat Miller, R-Indianapolis, said health care providers have suffered a cut in their reimbursement rates. Also, the state will be facing higher costs for Medicaid starting in 2014.
Sen. Lindel Hume, D-Princeton, said he doesn’t think the state should be returning money to taxpayers when Indiana currently owes $1.9 billion to the federal government for loans it took to make payments to unemployed workers. However, Sen. Brent Waltz, R-Greenwood, said the state has a plan for paying the money back.
“We’re lowering taxes. At the same time, we’re going to be increasing the reserves for the state of Indiana,” Waltz said.
Sen. James Buck, R-Kokomo, who is not a member of the committee, also asked the committee to consider a completely new option – one that would create an adjustable income tax rate that could be lowered when the state has higher reserves and raised when the state’s income dips.
The committee will meet later this month to discuss the issues before deciding whether to proceed with the bill.
Timothy Cox is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.