INDIANAPOLIS — Mike Braun has made tax relief a priority this legislative session. One way he wants to do that is by phasing out the tax on retirement income.
Dr. Matthew Will, Associate Professor of Finance at the University of Indianapolis, says Indiana has a good track record of low taxes.
"You do pay an income tax, that's 3% plus your county tax, which is the normal rate in Indiana,” Will said. “So, retirees do have to pay that."
Gov. Braun’s budget proposal would phase out the tax on retirement income over the next four years.
"Sometimes it's a question of whether you buy medicine or food so an extra hundred dollars would enable them to perhaps do both,” Ralanda Smallfelt, the General Manager of Seniors Helping Seniors, said. “So it would be very important."
Seniors Helping Seniors is an in-home care company. They help the elderly population age in place, meaning they stay in their home rather than going to a nursing home or assisted living facility.
Smallfelt says a change like this would benefit retirees on a fixed income.
"It's a great step in the right direction. It's not a win solution for everybody but it will help,” Smallfelt said.
According to data from the U.S. Census Bureau, in 2020, Indiana had a population of approximately 6.7 million people, with over 15% of the population being over the age of 65, making it one of the top states with a large retirement population.
While the average age of retirement remains the same, some retirement ages are continuing to work.
"I plan to work as long as I can. I don't really have an actual age right now,” Patricia Thillson, an employee of Seniors Helping Seniors, said. “I am just planning as long as I am healthy enough to work I will so I can save money."
Thillson is a 73-years-old. While she isn't retiring any time soon, she says this move will be beneficial.
"Anything is helpful and any kind of tax cut you can get on your retirement, IRA, or whatever is going to be helpful in that way,” Thillson said.
Right now, the state of Indiana taxes all income, according to AARP.
The expert we spoke with says allowing retirees to keep more of their income won’t have a major impact on the state.
"Retirees are on fixed incomes to begin with so to reduce their tax burden is going to be huge for them and it's not really going to hurt the state very much to give them a few extra dollars,” Will said.
Gov. Braun also proposed adding tax holidays for all Hoosiers and eliminating the tip tax. His budget plan will need approval from lawmakers at the statehouse.
