DOUG ROSS: No sale on tax cut before research

2013-03-08T00:00:00Z DOUG ROSS: No sale on tax cut before researchBy Doug Ross, (219) 548-4360 or (219) 933-3357

Indiana Gov. Mike Pence insists a 10 percent income tax cut would create Hoosier jobs, which would make this tax cut pay for itself. His proposal hasn't had a warm welcome in the Indiana General Assembly, however.

House Speaker Brian Bosma has been particularly cool to the idea. In a recent letter to county Republican chairmen, Bosma said he's willing to work with Pence but remains unconvinced the tax cut is right for Indiana.

"The most important job of state government is to be lean, efficient and, most importantly, sustainable in the long run, avoiding wild shifts in one direction or another," Bosma wrote.

Republican governors in a number of states are making a bid to lower the income tax rate, or eliminate it, to become more business-friendly. The idea is that executives would be more likely to move to a state that doesn't take as much of their money.

But cutting one tax rate generally means raising another. Some of these governors are talking about raising the sales tax to compensate for the lower income tax rate.

Indiana Democratic Party Chairman Dan Parker offered his own idea last month when he met with The Times Editorial Board. If Pence wants to cut taxes, Parker suggested, the sales tax would be a better option. 

"We have the highest sales tax rate in the Midwest," Parker said. I looked up those rates, and he's right.  

Indiana's rate is 7 percent. Only California has a higher rate, at 7.5 percent. (I've omitted local sales taxes.)

Raising the sales tax rate to compensate for the lower income tax rate wouldn't work in Indiana. Plus there's the argument over progressive vs. regressive taxes.

Pence's gamble is that cutting the income tax would create enough jobs to create additional income tax revenue for the state.

Cutting the income tax has been a Republican rallying cry at the federal level for years. Pence, don't forget, comes to the governor's office by way of the U.S. House of Representatives, where he was one of the most powerful Republicans.

Does this theory work in practice? There's plenty of debate about that, as evidenced by last year's presidential race and the current discussion over the federal budget.

While the General Assembly apparently does not plan to honor Pence's campaign promise, it should fund a thorough study -- not a legislative study commission, but a scholarly, nonpartisan study -- to offer a definitive conclusion, based on extensive statistical analysis, on whether this tax cut would work.

Let's separate the rhetoric from the data and see whether cutting taxes really works to stimulate the economy and what side effects they might have.

Then we can talk about Pence's proposal.

Editorial Page Editor Doug Ross can be reached at (219) 548-4360 or (219) 933-3357 or Follow him at and on Twitter @nwi_DougRoss. The opinion expressed in this column is the writer's and not necessarily that of The Times.

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