Farewell to the State Death Tax
by State Sen. Jim Banks (Columbia City, IN)
We’ve all heard Benjamin Franklin’s famous quote: “In this world, nothing can be said to be certain, except death and taxes.” One policy happens to combine both of these inevitable phenomena: the inheritance tax.
Under previous Indiana law, when a family member passed away and left certain property to his or her inheritors, the beneficiary was responsible for paying that tax. If this person couldn’t afford to do so, he or she was often forced to sell some of that property to get the needed money. This was a devastating reality for Hoosiers every year – that is, until the General Assembly took action.
In 2011, The Wall Street Journal listed Indiana as one of the worst states in the country for high inheritance taxes. That same year and the following year, I filed legislation to lift this unnecessary burden on Hoosiers. While the bill did not become a law, more lawmakers became involved in the conversation about how to best address this issue.
During the 2013 legislative session, the General Assembly created a state budget that retroactively eliminated the inheritance tax to Jan. 1, 2013. This sped up a measure from the previous year’s session, which would have phased out the tax over nine years by offering a gradually increasing credit from 2013 to 2021.
This move was a no-brainer. The inheritance tax is double taxation, and hardworking Hoosiers don’t deserve to be taxed their whole lives and then again upon their death. In fact, according to Forbes, only eight states collected an inheritance tax at the time that we decided to do away with ours. It was a move that put us on par with the rest of the country.
At a time when our state is seeing large surpluses, this tax cut makes sense economically. It’s been estimated that approximately $165 million more will remain in Indiana’s economy every year. Farmers and business owners will more easily be able to pass on their operations to a family member, and Hoosier seniors will have more reasons to stay in Indiana, rather than moving to a state that doesn’t have an inheritance tax. In short, this is a move that will benefit all Hoosiers for years to come.
I believe this is one of the most important things the General Assembly did for our state in 2013. It restores financial freedom to more families and allows beneficiaries to carry on their parents’ and grandparents’ legacies. That’s a valuable asset not only to these families, but the state economy as a whole.
A version of this article also appear on HoosierAccess.com and Chronicle-Tribune.com