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July 2005 Fewer Millionaires and a Larger Middle-Class: Tax Returns from 2003According to the Census of Governments, 52 percent ($11.2 billion) of the money coming into the state government’s coffers was from taxes. The other half of the state’s general revenue came in the form of intergovernmental revenue, current charges and miscellaneous revenue. (1) Indiana’s largest sources of state government revenue (55.5 percent) are general and selective sales taxes, contributing a collective $6.2 billion. The personal income tax is the state government’s next largest revenue stream, contributing $3.6 billion or 32.5 percent (see Figure 1). Figure 1: State Government Finances, 2003
For the 2003 tax year (payable in 2004), 2.83 million personal income tax returns were filed, a 1.1 percent decline (32,032 returns) since 2002. (This includes all filing types and out-of-state taxpayers who owed Indiana taxes.) Over the same time period, the population increased by 0.7 percent (41,244). Returns for taxpayers in the $20,001 to $30,000 income bracket declined the most, and the largest increase was for taxpayers in the $75,001 to $100,000 income tax bracket. There were 105 fewer returns reporting over $1 million in income and an increase of 5,225 returns reporting no income in 2003. Total federal adjusted gross income (AGI) for Indiana taxpayers and those non-resident filers was $116.6 billion, slightly down from the previous year (see Table 1). AGI is the sum of all taxable sources of income (capital gains, dividends, pension and annuity income), less any adjustments allowed. Table 1: Indiana Income Tax Returns, 2003 Payable 2004Marion and Lake county residents filed one-fifth of the state’s tax returns and had a fifth of the state’s total federal AGI. However, both Allen (6.1 percent) and Hamilton (6.5 percent) counties paid a larger share of income taxes than Lake County. (2) The average AGI for all filing types increased by 1.1 percent to $41,165 over the year. This increase did not keep pace with inflation, which was 2.3 percent for the same time period. Figure 2 is a good depiction of where wealth is located in the state, which not surprisingly encompasses the major metro areas. The most notable increase is the average value per return in Daviess County (17.3 percent), where 121 fewer returns were filed but the cumulative value of those returns rose by $65 million. Figure 2: Average Adjusted Gross Income 2003
Figure 3 looks at the median AGI. When there are some tax returns with very high incomes, the median is a closer measure of the “typical” taxpayer. (3) Figure 3: Median Adjusted Gross Income, 2003
Figure 4 looks at the average tax due per return before withholding and credits are figured into the equation. (Note: Only returns with tax liability were used as a base for this calculation.) As we might expect, the counties with the highest average adjusted gross incomes also had the largest income tax liability. Hamilton County led the state with an average tax of $3,285 per return. However, this has dropped $52 since 2002. Figure 4: Average Tax Due Per Return, 2003
The income tax—just another piece of the economic puzzle but certainly an avenue that should be explored. Notes
By Amber Kostelac, Data Manager
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