State Rep. J.D. Prescott is proposing a plan to eliminate Indiana’s property tax system and replace it with a broader sales tax on services. The plan would expand Indiana’s current 7% sales tax to cover certain services and labor costs that are not currently taxed, such as haircuts, auto repair labor, and landscaping.
How the Plan Would Work
Under the plan, services like haircuts and auto repair labor would be subject to the 7% sales tax. For example, a $300,000 home could see an additional $10,500 in upfront taxes if roughly half of the cost comes from labor that would become taxable under the proposal. Prescott said the goal is to shift Indiana toward a consumption-based tax system, where revenue would come from more people using services, including visitors from outside the state.
Prescott estimated that a household would need to spend about $14,300 in taxable services for every $1,000 they currently pay in property taxes to match that tax burden. He acknowledged that there could be some years where taxpayers pay more with this system, but he believes that most families would pay less over time.
Concerns and Next Steps
The proposal has raised questions from business owners, farmers, schools, and local governments that rely heavily on property tax revenue. Prescott said businesses that provide taxable services would be responsible for collecting and remitting the sales tax, similar to how businesses already handle sales tax on goods. He outlined how revenue would be distributed to replace property tax funding, with 10% of the revenue going into a reserve account and the remaining funds divided among schools, counties, cities, and other local entities.
Prescott is currently on a statewide listening tour to gather feedback on the proposal and identify potential issues before bringing the legislation back to lawmakers. He hopes to continue building support for the proposal ahead of the next legislative session, using feedback from Hoosiers to refine the plan.
Original reporting: WOWO News/Talk (Fort Wayne) — read the source article.
