INDIANAPOLIS | Gov. Mike Pence wants to reduce the income taxes paid by families with children as part of his plan to promote marriage and childbearing in Indiana.
The Republican governor on Thursday proposed increasing the amount of earnings not subject to income tax from $1,000 per child to an unspecified higher amount that would grow automatically in future years based on the rate of inflation.
"We've not increased the dependent exemption in our tax code since 1978, even though the cost of living has increased 3.6 times since then," Pence said. "The truth is, if we'd been indexing our exemptions all along ... our dependent exemption would be worth $3,600 per child. That's a difference in the lives of families."
The U.S. Census Bureau estimates there are 1.6 million Hoosier children younger than 18. Raising the per-child exemption to $3,600 would exclude $4.16 billion in income from tax.
At Indiana's 3.4 percent income tax rate that would pull at least $141.5 million from state coffers, and likely more since parents are able to claim the dependent exemption up to age 24 if their child is a full-time student.
The increased income exemption would not apply to individual adults or families without dependent children.
Counties and local governments, already struggling under state-imposed property tax caps, also would lose millions in local income tax revenue under Pence's plan. Ironically, most would probably be forced to shutter family-friendly amenities like parks and libraries.
Pence said nothing about how he would replace that money or whether state programs and services would be eliminated to make up for the tax cut.
Earlier this month Pence canceled another $57 million in planned spending by state agencies and universities after November tax revenue failed to meet expectations. Since taking office in January, Pence has reduced spending by $172 million to avoid tapping the state's $2 billion budget reserve.
Pence also did not explain how raising the dependent exemption would work alongside his proposal to eliminate the business personal property tax, which would take an additional $1 billion a year from schools and local governments.
The governor said both items fall under his vision for a revised tax code, but he will not detail the full list of changes he's seeking. He repeatedly has said he will let the Republican-controlled General Assembly decide how to implement his vision.
Other items on Pence's "family" agenda include: passing a constitutional amendment limiting marriage to opposite-gender couples; improving the state's nearly worst-in-the-nation infant mortality rate; providing prekindergarten vouchers to 40,000 low-income children; and promoting adoption.