Indiana's state tax collections have remained stable for the past three decades, but that is changing. Indiana's 2024 state taxes were the fourth-lowest as a share of our economy since 1998.

Local taxes are falling, too. Property tax collections as a share of GDP have plummeted by about one-third since 1998, and local income taxes by even more. As of 2024, both measures are at historic lows.

It may not seem that way to most Hoosiers. Over the same period, income growth has stalled and the share of GDP going to workers has slipped. The tax burden has shifted substantially from businesses to families over the past 30 years.

The effects are clear. Local government employment as a share of the total workforce was at its lowest in 2024, which is true for teachers, park workers, librarians and local police. Nowhere was the loss of tax dollars more apparent than in local government, which is the place where we get our most important services, including police, fire and schools.

Now, think back to the 2024 gubernatorial election, which was all about how Hoosiers were overtaxed. We aren't, of course, but even if we were, we were less "overtaxed" in 2024 than at any time in recent decades.

Voter concern about property taxes was no mirage — households are bearing an increasing share of taxes while businesses enjoy cuts. But, last year's sweeping tax cuts, Senate Enrolled Act 1, just didn't work out for families.

To illustrate: I recently gave a speech to the Indiana Library Federation, where I asked roughly 60 librarians, by show of hands, who has lower property taxes this year. Two people raised their hands. In the year after the largest property tax cut in state history, only about 1 in 30 taxpayers noticed a cut.

It is worth asking everyone who voted for it to explain how that came to pass.

Last year's property tax cuts were the biggest business tax cut in state history. For close to 85% of businesses, SEA 1 marked a 100% elimination of business personal property taxes. For the remaining 15% — large, capital-intensive industries — opening shop in Indiana is a windfall, with full tax abatements meaning most will never be taxed on their capital investment.

Just to make the case plainly: If you are a family who moves to Indiana and buys a home for $225,000, you'll pay taxes on that investment until you die. If you invest $2 billion in a data center or wind turbines or a logistics facility, you'll likely pay no taxes whatsoever on that investment.

To accommodate this huge business tax cut, SEA 1 pushed local governments to enact income taxes, while forcing property tax cuts for older Hoosiers. Indiana has plenty of seniors and is bleeding young people at an economically disastrous rate.

Indiana is making it cheaper to be old while making it more expensive to be young. Guess what that obvious incentive is going to do to state demographics.

You do have to hand it to the Indiana Chamber of Commerce. It lobbied heavily for these tax cuts and was the only entity in the state with the foresight to study the tax options. Everyone else — counties, cities, townships, school corporations, libraries — confronted the issue without evidence.

That was a costly mistake. But the chamber study didn't ask the right questions, and that too was a mistake. The ill effects will simply take longer to arrive.

Last year, Indiana had somewhere between the sixth- and 10th-lowest tax burdens for businesses. When you add in tax incentives, Hoosier manufacturers faced the fourth-lowest tax rates in the country — a fact the chamber study purposefully omitted, relegating it to a footnote.

That may be good lobbying, but it is bad policymaking. The business tax cuts were very large compared to local government budgets, but they'll barely change Indiana's business tax rankings and will play no measurable role in attracting businesses. The only effect they'll have is in reducing the cost of automating labor, as several academic studies found.

The number of Hoosiers in the labor force peaked last summer and is unlikely to ever again be that high. The next annual population data will reveal a shrinking state with an aging workforce.

The go-to-college rate has dropped so dramatically that the state should expect 26% of each age cohort to graduate from college — below the current 30% of Hoosier adults with a degree, and well below the national level of 39%. Indiana's supply of college graduates will begin to fall over the coming decade.

Reversing these trends will require tax dollars that the state doesn't have, largely because of a business community that is ignoring the long-run effects of its favored policies on Indiana's labor force and consumers.

Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.