POLITICS

Automatic tax refund from the state? Don’t expect one

Tony Cook
tony.cook@indystar.com

Despite a healthy budget surplus, taxpayers shouldn’t expect any money from Indiana’s automatic taxpayer refund.

Budget officials are still closing out the fiscal year that ended June 30, but they’re confident the final surplus won’t be enough to trigger an automatic refund to Hoosier taxpayers.

“We’re not anywhere close,” State Budget Director Brian Bailey said Thursday.

As of June 12, budget officials were projecting a surplus of $1.93 billion, or about 12.7 percent of the budget.

In the past, that would have been enough to trigger a refund.

But lawmakers, who have never been a big fan of the idea, have steadily chipped away at the automatic refund law since Gov. Mitch Daniels first signed it in 2011.

Even at the time, some lawmakers expressed concerns that the money might be better spent on education or paying down pension obligations. In fact, they required that half of any refund be used for public safety pensions.

Still, the threshold for a refund was only 10 percent and that allowed Daniels to give taxpayers a parting gift before he left office at the end of 2012 — a refund of $111 to individual income tax filers and $222 to joint filers. Taxpayers got the money as a credit on their tax returns the following year.

But even before taxpayers began to receive that money, lawmakers set out to increase the threshold for the automatic refund, making it more difficult for taxpayers to get money back in the future.

The General Assembly increased the threshold to 12.5 percent during the 2012 session and limited potential refunds to odd-numbered years, when lawmakers craft the state’s two-year budget.

Then, in 2013, the legislature pre-empted a refund by requiring that any reserves in excess of 12.5 percent that year go solely to the state’s pension fund. They also required state budget officials in future years to not count the portion of the reserves set aside for K-12 education.

It is that last provision that will prevent any automatic refund this year.

Although the state will end the year with a reserve balance of about 12.7 percent, a projected $300 million of those reserves are set aside for K-12 tuition.

When that amount is subtracted, the reserve balance is only about 8.7 percent of the budget — well below the 12.5 percent threshold.

That means that when taxpayers file their income taxes next year, they shouldn’t expect to get anything extra back from the state.

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.