Compared to the rest of the U.S., Indiana ranks relatively high in the quality of the state’s tax system for small business, at 14th of all 50 states, according to a Small Business & Entrepreneurship Council study. In the report’s findings of each state’s tax burden, Indiana maintains a competitive economic environment but there are barriers to investment.
Indiana is applauded as one of the most improved tax climates because the state cut personal income, individual capital gains and dividend, corporate income, and capital gains tax rates last month. Indiana’s tax decreases to 3.23 percent put the state in 13th place for best personal income and capital gains tax rates, and 10th for dividends and interest tax rates.
For property, adjusted unemployment, and corporate income tax, Indiana positions in the middle range compared to other states with manageable but still high rates. Indiana scores poorly in the state’s sales, gross receipts and excise, and gas taxes.
Maintaining these below average rates deters investment and creates added costs for businesses. Indiana needs to make substantial tax reforms to improve its business climate and competitiveness, like eliminating capital gains and income taxes.
As small businesses look to Congress to reform the federal tax system, it’s important to also keep pressure on elected officials for tax reform on the state and local levels.