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Study Predicts Indiana To Gain $2.3 Billion In Sales Tax

Last updated on Tuesday, October 13, 2009

(UNDATED) - A nonpartisan study says Indiana could rake in an extra $2.3 billion dollars in sales taxes by extending the tax to services.

The Indiana Fiscal Policy Institute says even if you excluded doctors, lawyers, and business-to-business transactions, taxing all other services would add $1.2 billion dollars to the state's bottom line.

But study author Earl Ryan cautions at least four states have repealed sales-tax expansions after a year or less.

In Michigan, an attempt to tax services was on the books for just 17 hours before being repealed, amid controversy over which services were exempt and which weren't.

The institute says it isn't advocating for or against a service tax, but providing an independent analysis, as some legislators float the idea.

The institute counts 168 different services that could be taxed.

No state taxes all of them, though Hawaii, New Mexico and Washington come close. Indiana's 24, including utilities and cable service, is more typical.

All of Indiana's neighbors are in that range except Ohio, which taxes 68 different services.

The institute warns it might be cleaner and politically easier to pass a law declaring what's exempt than to pick what's newly taxable.

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