This column was originally published for the Ball State University Center for Business and Economic Research Weekly Commentary blog.
By Michael J. Hicks
July 12, 2026
The 2027 state legislative session should be spent broadening Indiana’s tax base and building a system that is more attractive to younger families. Instead, it looks like lawmakers are poised to dramatically worsen Indiana’s appeal to young, mobile families.
Gov. Mike Braun first proposed to eliminate property taxes on retired residents and those without a mortgage payment. This would reduce available housing stock and raise tax rates or reduce services for younger families, probably both.
I didn’t think this plan, which I labeled as incoherent, could get worse. But the recent Indiana GOP convention came along and said, “Hold my beer.” Republicans want to eliminate property taxes altogether.
A useful way of thinking about raising or lowering taxes is to consider who actually pays. This is especially important for states, like Indiana, where most places struggle to attract residents or economic growth.
One look at our current (and now proposed) tax policies will show we do a dismal job of connecting taxes to economic growth.
Most households own wealth through homes, businesses and retirement funds. They also earn income on labor and consume goods and services. Everyone’s finances vary, but families tend to share similar circumstances based on age. Those similarities make age an important factor when considering the taxes we levy on wealth, income and consumption.
About 70% of household spending in Indiana is on services and about 20% on consumer non-durable goods, such as food and clothing. The final 10% is on durable goods.
Families with heads of household aged 20 to 40 have little wealth and consume more non-durable goods than older families at retirement age. Younger families also consume a lot more services, particularly local government services, such as schools. Older families consume fewer local services and more federal services — particularly Social Security and Medicare. These, of course, are paid for by current working families.
A tax system that promoted economic growth would focus on younger families because they are the most mobile cohort. Businesses, in turn, go where people want to live. The overwhelming majority of mobile families move to places with higher taxes and more abundant public services.
An ideal approach would comprise a broad base of taxes — all income, all property, all consumption — and tax all these activities at a low rate, then allow local governments to vary their taxes based upon the preferences of residents.
Indiana’s tax system dampens economic growth.
First, the state’s tax revenues as a share of our economy are now as low as they’ve been since we’ve kept records. Both state and local government employment per 100 residents is near a 40-
year low. The claim that state or local spending in Indiana is “out of control” or “skyrocketing” is a fantasy of purposeful ignorance.
Again, if tax rates really mattered as much as quality public services, Indiana would be a prosperous and fast-growing state. Instead, we are among the poorest dozen states in the nation, and among the slowest growing.
The current taxes on income seem about right, considering income is so heavily taxed at the federal level and likely to rise in the coming years. Our current sales taxes are higher than they should be because we have so narrowed the tax base.
By excluding all services and food, our sales taxes are at least 3 cents on the dollar higher than they could be. If we taxed all goods and all services, the sales tax could easily drop to 4 cents — and maybe even raise tax revenue.
Before 2025, our property taxes weakly supported economic and population growth. But the ill-considered, record-setting tax cuts to businesses made that much worse. Today, the tax burden for local government has been almost wholly shifted to families. That will necessarily worsen as most local governments raise local income taxes to backfill these enormous business tax cuts.
Now, Republicans are selling the elimination of property taxes through town halls across the state. Rep. JD Prescott is proposing to extend Indiana’s 7% sales tax to most services while exempting healthcare and childcare services, and eliminating all property taxes.
What this does to young families is shocking.
My back-of-the-envelope math (which is light years more sophisticated than the current plan) is that the sales tax on services will cost the average Hoosier $1,627 per year, or about $3,743 per family. That is the equivalent of property taxes on a home of close to $450,000, which is about double the median home value in Indiana.
Now, when I argue that Indiana needs to collect more taxes, I mean a modest tax increase overall — not an explosive tax increase on young families that the GOP is conjuring under its plan to eliminate property taxes.
But, eliminating property taxes won’t double taxes for most people. Businesses will see a windfall, particularly data centers and large manufacturing firms. Older folks who own homes and earn less income (because they are retired) will get a windfall tax cut. And farmers will see their tax liability drop to well below zero (because they already are getting subsidies that are greater than their gross state and federal tax).
Everyone else, particularly younger families with kids, will face a staggering tax increase under the plan now being promoted by Prescott and the state GOP.
This is far and away the worst tax proposal I’ve ever seen emerge from a political party platform. It represents the biggest transfer of tax burden away from businesses and wealthy families to young and working families in any US state since the Civil War (and probably before that).
The mere existence of this plan is scandalous and would give Indiana the most regressive state tax system in the developed world by a long margin. It should be entirely disavowed by election day.
Michael J. Hicks is professor of economics and the director of the Center for Business and Economic Research at Ball State University. He previously served on the faculty of the Air Force Institute of Technology’s Graduate School of Engineering and Management and at research centers at Marshall University and the University of Tennessee. His research interest is in state and local public finance and the effect of public policy on the location, composition, and size of economic activity.
The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body. Also, the views and opinions expressed do not necessarily reflect the views of The Indiana Citizen or any other affiliated organization.
