EDITORIAL: Put tax cut promise on back burner

2012-12-20T00:00:00Z EDITORIAL: Put tax cut promise on back burner nwitimes.com
December 20, 2012 12:00 am  • 

From all indications, Gov.-elect Mike Pence's 10 percent tax cut plan is dead in the water in the General Assembly. A governor's policies aren't necessary legislators' views.

Key legislative leaders have said they are skeptical of Pence's plan to cut the individual income tax rate to 3.06 percent from the current 3.4 percent.

This comes even as Indiana Department of Transportation Commissioner Michael Cline has warned the State Budget Committee of a looming $200 million shortfall for routine transportation needs, among other fiscal problems facing the state.

Nonetheless, Pence continues to push for the income tax cut.

"I'm determined to keep my promise to the people of Indiana advancing that," Pence said last week.

The Washington, D.C.-based Institute on Taxation and Economic Policy crunched the numbers on Pence's plan. The top 1 percent of Hoosiers, with incomes above $325,000 per year, would see a $2,264 average tax cut under Pence's plan. Those making $33,000 to $53,000, in the middle of the scale, would see their taxes cut $102 on average. That's the result of Indiana having a flat tax rate, rather than a graduated rate.

Of the nearly $500 million in lost revenue, 56 percent would go to the top 20 percent of income earners, or those making $80,000 or more annually.

Pence's plan assumes business owners would use the extra revenue from the tax cut to hire Hoosier workers, thus boosting the economy and increasing overall tax revenue.

For Hoosier taxpayers who itemize on their federal tax return, a state income tax cut would increase their federal tax burden. State and local taxes can be used as federal income tax deductions.

Pence should be commended for wanting to keep a campaign promise, but it doesn't need to be kept right away. 

A November poll by Ball State University found only 31 percent of adults favored Pence's tax cut, with 64 percent preferring that the money be invested in education or workforce training.

Pence should shift his focus to other fiscal concerns, including how to fund the state's transportation infrastructure needs and how to pay for essential reforms to the Department of Child Services.

Let the income tax cut pledge simmer on the back burner for now while Pence gets a better grasp of Indiana's finances and needs.

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