INDIANAPOLIS (AP): A big jump in Indiana’s state tax collections over the past few months announced by state officials Wednesday will result in a refund for taxpayers, although they’ll have to wait until next year for that money.
State officials reported that overall tax revenue grew 14% over the past year as collections bounced back stronger than expected from the COVID-19 pandemic recession. That pushed the state government’s cash reserves to $3.9 billion as of June 30.
Since the record-high reserves figure represents 23% of annual state spending, it will trigger the state’s automatic taxpayer refund process for the first time since 2012.
Officials say about $545 million will be divided evenly among taxpayers as a credit on their state tax returns submitted next year. That will reduce 2021 tax bills, but the state won’t be sending out budget surplus refund checks, said Cris Johnston, director of Indiana’s Office of Management and Budget.
While the 2012 refund amounted to $111 for individual income tax filers, state officials won’t determine the new refund size until perhaps November when they know the number of 2020 Indiana tax filers, Johnston said.
The state’s tax revenue growth was certainly helped by more than $14 billion in coronavirus relief money sent to Indiana families from the federal government under both the Trump and Biden administrations, said Johnston, who is Republican Gov. Eric Holcomb’s top budget adviser.
“That’s a lot of money that comes down, it can be used to pay off debt, go to your savings or spent,” Johnston said. “I would be foolish to say that didn’t have an impact on the tax revenues.”
The prospect of such a large surplus was unthinkable a year ago as the state’s economy still reeling from widespread business shutdowns and job cuts during the early months of the coronavirus outbreak across the country.
Republican Gov. Eric Holcomb ordered many state agencies to cut spending by 15% and Johnston said some economic forecasts didn’t project state tax revenues fully bouncing back until 2024.
Most of the spending cuts were rolled back and a state revenue forecast in April projected annual tax collections through June going up about 6%. But those collections went up by about one-third during May and June to give the state about $1.1 billion more than expected for just those two months.
Johnston said he anticipated that growth more like the 4% expected the next two years, although he didn’t guess when the pace would ratchet down.
“Eventually we will fall back into this sort of range that we do normally experience,” Johnston said. “So, the same uncertainty we had with how long we thought the adverse situation was going to occur.”
Holcomb and the Republicans who dominate the Legislature didn’t plan on hitting the level of nearly $3.4 billion in reserves to trigger the refund. The new state budget approved in April took steps such as directing $600 million in the unexpected revenue toward a teacher pension fund and $110 million toward early payoffs of construction project loans.
Along with the $545 million to the refund, an equal amount will be deposited in a teacher pension fund. That will still leave projected reserves of nearly $3.2 billion a year from now.
Republican House Speaker Todd Huston said the tax collections were a sign of a strong state economy.
“As I’ve said before, we’re going to jump at the chance to explore sustainable tax cuts and reforms next session,” Huston said in a statement. “It’s critical for us to build on this record-breaking momentum and continue to do what’s right by taxpayers.”
Democrats credited pandemic relief spending supported by President Joe Biden and the Democratic-controlled Congress for the state’s improved finances.
Rep. Greg Porter of Indianapolis, the top Democrat on the House Ways and Means Committee, said that even after the refund “Indiana will still be left with an embarrassment of riches that could be better used to help our state’s human infrastructure.”