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December 7, 2012

Incoming Gov. Pence still plans individual income tax cut

Move would cost about $525M

INDIANAPOLIS — Incoming Gov. Mike Pence pitched his plan to lower Indiana’s individual income tax to a group of business leaders Thursday.

The Republican who will take office Jan. 14 has proposed chopping that rate from 3.4 percent to 3.06 percent. However, that idea got a skeptical reception from GOP state legislative leaders who are preparing to write a new two-year budget.

Pence used his speech at the Indiana Chamber of Commerce’s “Indiana Vision 2025” conference to say he still plans to push for the tax cut when lawmakers meet for their four-month session starting in January.

“We can fund our priorities and we can put more money in the pockets of taxpayers and Hoosier businesses in ways that will create jobs, and I ask you to keep an open mind about it,” he said.

The governor-elect is pushing a plan that would cost about $525 million per year. On Thursday, he dryly referred to positions staked out by House Speaker Brian Bosma, R-Indianapolis, and Senate President Pro Tem David Long, R-Fort Wayne.

“I’ve been reading a little more about my plan since the election, and let me say to you from my heart: I respect the opinion of my colleagues, friends all, and I welcome the discussion,” he said Thursday afternoon.

Bosma has joked that as speaker, he stopped outgoing Gov. Mitch Daniels from raising taxes — he proposed a 1 percent income tax hike on top earners for one year — in his first year in office, an implication that he might also stop Pence.

He has repeatedly underscored the tax cuts Indiana is already implementing, including a step-down of the state’s corporate income tax rate from 8.5 percent to 6.5 percent, and a nine-year phase-out of the state’s inheritance tax.

And Bosma has emphasized that more than half of the state’s tax revenue already comes from sales taxes, and that he is concerned with throwing that ratio further “out of balance.”

A key moment will come this month, when a state fiscal panel releases its forecast of how much money the state will take in over the next two-year budget period.

Lawmakers lean heavily on that fiscal forecast, as well as an updated version that will be released in April, just prior to the year’s legislative session wrapping up, to determine how much the state can afford to spend.

With the state’s reserves currently topping $2 billion, and still at more than $1.4 billion after Daniels’ automatic income tax credits and payments to state pension funds are removed from Indiana’s main checking account, a number of interests are jockeying for shares of the extra cash.

The University of Southern Indiana and other state-sponsored schools that have suffered from the state’s belt-tightening in recent years are asking for more money during this two-year budget cycle. Others are seeking enhanced K-12 education funding.

Meanwhile, local officials have said they need help paying for the maintenance of roads and for dealing with abandoned houses.

The tax cut Pence is proposing would save a family that earns $50,000 per year about $170. It would cost the state a total of about $525 million in tax revenue, Pence’s campaign estimated. Pence said Indiana now has the largest surplus in its history.

“Because of that surplus, we have choices we can make,” he said. “Those choices include tax relief for Hoosiers and Hoosier businesses. I’ve made my priorities clear.”

Thursday’s Indiana Chamber of Commerce event brought about 300 business leaders and state lawmakers together to talk about a set of initiatives they’ve launched, aiming to accomplish them by 2025.

Pence said he intended to lean on members of the group for regional councils he intends to set up to try to craft curricula for vocational and technical education programs in the areas’ high schools.

He also said he wants them to help pitch the state to outside business leaders and investors so that they might be more likely to open facilities in Indiana.

“I really want to challenge all of you to become ambassadors for Indiana on a more regular basis. I want to enlist you in our jobs cabinet in Indiana,” he said. “I intend to be calling on the people in this room on a regular basis.”

The event came after Pence made stops in South Bend and Fort Wayne, where he met with two Democratic mayors — South Bend’s Pete Buttigieg and Fort Wayne’s Tom Henry.

He also said on his first day in office, he will sign an executive order declaring a moratorium on new state regulations, and he’ll have the Indiana Office of Management and Budget, led by Chris Atkins, conduct an in-depth review of all the state’s current regulations.

“I want to know where the obstacles are,” he said, “and I want to address them from a regulatory standpoint in ways that are fresh and new. I think the way you do that is you hit the pause button, and you look back.”

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