2013 Indiana General Assembly

Pence backing off fight for tax cut

2013-04-16T16:30:00Z 2013-04-17T09:00:55Z Pence backing off fight for tax cutDan Carden dan.carden@nwi.com, (317) 637-9078 nwitimes.com
April 16, 2013 4:30 pm  • 

INDIANAPOLIS | Gov. Mike Pence received the optimistic state revenue forecast he's been counting on since January to show Indiana can afford his $500 million income tax cut, but instead of celebrating, Pence seemed more interested in compromising.

The State Budget Committee learned Tuesday that Indiana will take in $290.3 million more during the two-year period starting July 1 than budget experts from the Legislature and governor's office originally estimated in December.

The bulk of the new money comes from growth in revenue from individual income taxes, which is projected to increase to $5.42 billion in 2015 from $4.92 billion this year.

Nearly all other state revenue sources, including sales taxes, remained unchanged or declined compared with the earlier forecast. Gaming revenue is projected to drop an additional $140 million during the next two years due to competition from new Ohio casinos.

Overall, state revenue is now forecast to grow 1.7 percent this year to $14.37 billion, 2.5 percent more in 2014 and an additional 3.7 percent in 2015.

But despite the chance provided by those results to repeat his demand that state legislators cut the income rate to 3.06 percent from 3.4 percent, Pence said he'd rather work with lawmakers on a compromise tax reduction plan.

"We're involved in productive discussions with members of the General Assembly," Pence said. "I think a mix of income tax relief and inheritance tax relief provides a framework in which we can lay a foundation for real economic growth in our state."

Pence's sudden embrace of the proposal to speed up the 2022 phaseout of the inheritance tax, which was included in the budgets separately approved by the Republican-controlled House and Senate but not the governor's budget proposal, suggests Pence has accepted he won't get his full 10 percent income tax cut.

The House budget did not include any income tax reduction. The Senate plan cut the income tax rate to 3.3 percent in 2015.

State Rep. Tim Brown, R-Crawfordsville, and state Sen. Luke Kenley, R-Noblesville — the House and Senate budget leaders — both said they believe about $500 million in cuts is appropriate if applied to income taxes, corporate taxes and inheritance taxes — not just the income tax as Pence originally wanted.

"Everybody is still crawling out of the recession, so we do want to give money back to Hoosiers, and we'll just look at will the priorities all come together," Brown said. "I feel very firmly that they will."

Those priorities also may include increased spending.

State Sen. Karen Tallian, D-Ogden Dunes, said the state should consider replacing money cut during the 2009-10 recession from school budgets and Medicaid payments to doctors.

"This (revenue forecast) does not just mean we have the money to do all these tax cuts, especially not all at once," Tallian said.

Lawmakers have until April 29 to approve the state's two-year spending plan.

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