Indiana House proposes larger, costlier taxpayer ‘refund’ plan

House and Senate Republicans in the Indiana General Assembly remain on a collision course over how to provide inflation relief for Hoosiers after committees from both chambers passed bills that take vastly different approaches.

The House Ways and Means Committee voted 22-0 Tuesday to advance House Bill 1001, an economic relief package that includes parts of Gov. Eric Holcomb’s plan to give back $1 billion to Hoosiers in the form of $225 tax refund checks along with about $50 million to support pregnant women and their families.

The bill, authored by Rep. Sharon Negele, R-Attica, includes the language of the governor’s plan, but with an added provision that allows Indiana residents who didn’t file taxes for the tax year 2020 to file an affidavit with the state revenue department to claim the refund. Residents who received the $125 automatic taxpayer refund this year automatically qualify for the $225 refund.

The expanded plan, designed to put money in the pockets of Hoosiers who are on Social Security, disability, public assistance or didn’t make enough to file taxes, will come at an increased cost, state budget officials told lawmakers Tuesday.

There are an estimated 500,000 Hoosiers who fall in that category, according to Cris Johnston, director of the Indiana Office of Management and Budget, and each application would have to be vetted for fraudulent claims.

“Operationally, this will require the creation of a new system, which will involve creating an application, validation, setting up an appeal process and adjudication of those appeals,” Johnston said.

Applicants would submit an affidavit attesting they were an Indiana resident for at least 183 days during the tax year 2020, they weren’t a dependent and did not file because they were not required to file. Applicants who are denied a refund could appeal the process.

“The magnitude of this number makes it very difficult for the Department of Revenue to verify the accuracy of potentially half a million affidavits,” Steve Madden, the department’s director of tax policy, told lawmakers.

Madden said it would cost about $3.4 million — a figure that is not included in HB 1001 — to distribute the $225 refund.

Rep. Ed Delaney, D-Indianapolis, questioned whether the additional tax refund served as a mechanism to avoid investing in state programs.

“We’re choosing between dribbling out money and making long-term investments in our schools, things like passenger rail. … Is that the choice we’re making?” Delaney said.

Delaney proposed an amendment that would have reduced the state’s most recent obligation to the teacher pension fund of $2.5 billion to $1 billion and allocated $2 billion from the state’s general fund to support capital projects.

It failed to garner enough votes to move forward.

Senate takes different approach

While House Republicans are embracing the idea of a tax refund, their colleagues in the Senate remain reluctant to give out a cash infusion during a period of record-high inflation.

On Tuesday, the Senate Appropriations Committee passed Senate Bill 3, which includes a number of economic relief measures designed to help Hoosiers without handing them a check, as well as funding to support capital projects and pay down future debt obligations.

The bill, sponsored by Sen. Travis Holdman, R-Markle, suspends the state sales tax on residential utilities for six months — including the 7% sales tax on electricity, water, gas, internet and phone bills.

Other measures in the bill include:

• Capping the state’s gasoline use tax at $0.295 per gallon through June 30, 2023.
• Suspending the increase to the gas tax and special fuel tax that took effect July 1 until June 30, 2023.
• Allocating an additional $400 million to the pre-1996 Teachers’ Retirement Fund.
• Providing $215 million to help fund capital projects that were included in the 2021 budget but have stalled due to increasing construction costs.

The Senate committee passed the bill with no amendments.

House and Senate lawmakers will have to reach some sort of compromise if and when the bills advance out of their respective chambers.

The Senate will resume its session at 1:30 p.m. Wednesday. The House plans to convene at the same time Thursday.

Common ground on funding for families

The House and Senate appear more aligned in their efforts to provide funding to support pregnant women and their families in light of the General Assembly’s plans to restrict abortion access. 

HB 1001 includes additional tax credits for households with dependents and adopted children. It adds donated breast milk, noninvasive prenatal and routine carrier screening and costs of labor and delivery to the list of supplies and services provided by Medicaid, and includes funding for local health departments to provide financial assistance to Hoosiers seeking contraceptives.

The bill appropriates about $50 million for various purposes related to children and families, including $10 million to support the expansion of the Nurse Family Partnership Program, which pairs a pregnant woman with a registered nurse who guides them through their pregnancy and the first two years of the child’s life.

Under the bill, diapers would be exempt from the state’s sales tax, a provision absent from the Senate proposal.

Senate Bill 2 establishes a Hoosier Families First Fund with $45 million from the state’s general fund for the fiscal year 2023, authorizing the state budget agency to provide additional funding for existing and new programs offered by the IndianaDepartment of Child Services, the Family and Social Services Administration, the Indiana Department of Health and the Indiana Department of Homeland Security. And like the House bill, it includes expanded adoption and child tax credits.

Both the House and Senate bills passed with unanimous support.