2013 Indiana General Assembly

Pence 'confident' he'll get income tax cut

2013-03-17T00:00:00Z 2013-03-17T23:16:03Z Pence 'confident' he'll get income tax cutBy Dan Carden dan.carden@nwi.com, (317) 637-9078 nwitimes.com
March 17, 2013 12:00 am  • 

INDIANAPOLIS | Republican Gov. Mike Pence remains "hopeful" and "confident" state lawmakers will approve his proposed income tax cut, despite blunt hints from Republican legislative leaders that it's not going to happen.

"I am strongly of the belief that taking this moment where Indiana has the largest surplus in our state's history and while we fund our priorities -- which in our budget included increasing funding for roads and schools -- that we ought to permanently reduce the marginal income tax rate," Pence said. 

The first-year governor has recommended shrinking the individual income tax rate to 3.06 percent from 3.4 percent, a 10 percent cut.

That revenue reduction would cost the state approximately $300 million during the 2014 budget year, which starts July 1, 2013, and an additional $500 million in 2015 and every year after that.

Indiana would maintain its $2 billion budget reserve under Pence's plan.

"Government should only collect what it needs, and when it's poised to collect more than it needs to operate it ought to leave that money with the people," Pence said. "Because I think people spend it better and more efficiently and more wisely in the economy in ways that create growth and opportunity than government ever will."

He noted reducing the income tax would benefit 4.4 million Hoosiers -- more than the 5,000 estates helped by speeding up the phaseout of the state's inheritance tax or reducing the corporate income tax rate, which would only aid 17 percent of businesses.

Critics of Pence's plan, including House Speaker Brian Bosma, R-Indianapolis, and Senate President David Long, R-Fort Wayne, question whether Pence's proposed tax cut would produce the biggest bang for the state's bucks.

They've pointed out that a Hoosier earning $50,000 a year will pay only $170 less in taxes under Pence's plan. Even someone making $1 million a year will pay just $5,400 less, which isn't enough to hire a new employee, the critics contend.

Instead, House Republicans have proposed increasing spending on education to restore funding cut by Republican former Gov. Mitch Daniels when state revenue tanked in 2009-11. They also propose reshuffling funding for other state agencies to create an annual $250 million dedicated pot to pay for road and bridge improvements.

In a rare move, Bosma sent a letter last month to every Republican county chairman explaining that Pence's tax cut would make those needed spending increases all but impossible.

Pence said he is not dismayed by Bosma's actions and remains optimistic that once the revised 2014-15 state revenue forecast is issued in April -- and it shows Indiana can afford an income tax cut -- lawmakers will embrace his plan.

"We're going to come together, and we're going to work this out," Pence said.

Asked directly if he would veto a budget that does not include an income tax cut, Pence said he does not respond to hypothetical questions.

And in any case, "I don't believe that's going to happen," he said.

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