A one-year state income tax break on overtime and tips for Hoosier workers has cleared the Indiana Senate as lawmakers pick and choose among the federal tax cuts that President Donald Trump pushed through Congress last summer.
One federal business tax cut on some production property — projected to potentially total $66 million the first year — was left out of a bill that House members approved Wednesday because of that hefty cost.
The 94-0 House vote on Senate Bill 212 made it the first bill to clear the Legislature this session and be sent to Gov. Mike Braun.
House Ways and Means Committee Chair Jeff Thompson said the bill was fast tracked because the federal tax breaks it included would impact 2025 tax returns.
Those changes, including a strengthening of the state adoption tax credit, are relatively small totaling about $1 million a year, according to a legislative analysis.
Tips, overtime tax break
Senators, meanwhile, voted 47-1 on Wednesday in favor of Senate Bill 243, which includes conforming with the temporary tax breaks on tip and overtime income along with the interest on loans for American-made vehicles that were part of Trump’s “One Big Beautiful Bill.”
Those cuts are expected to reduce state tax revenue by about $250 million and apply to 2026 income on tax returns filed in 2027.
Sen. Travis Holdman, who chairs the Senate Tax and Fiscal Policy Committee, said the revenue drop would be covered by the growing state surplus.
“We’ll have to review that next year to see if we can afford to extend it for a longer period of time,” Holdman said Wednesday.
The bill now goes to the House for consideration.
Democrats seek broader cuts
Legislative Democrats have unsuccessfully pushed for additional tax breaks in each of those measures.
Sen. Andrea Hunley, D-Indianapolis, lamented that Republicans have refused to lift the state’s 7% sales tax on period products even though it would cost the state only $5 million a year in revenue.
House Republicans this week rejected a proposed bill amendment from Democrats to add a $1,000 state tax credit per child or dependent in each household.
Rep. Greg Porter, the top Democrat on the Ways and Means Committee, denounced the Republican explanation that such a credit was a fiscal issue that should be considered in 2027 when a new two-year state budget is adopted.
Porter said that Republicans were willing to adopt business tax cuts while turning down ways to help residents.
He argued that there was no difference between “an appropriation and a tax expenditure, they take from the state treasury and equal the same.”
It remains unclear whether House Republicans will support the tax and overtime tax cut.
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