Wednesday, August 03, 2011

Pence Wants To Cut Income Taxes And Repeal Inheritance Tax

Perhaps U.S. Rep. Mike Pence should have stuck to his game plan of not making any policy statements until after next year's May primary election for his gubernatorial race. Pence tells the AP that he is working on a plan to reduce Indiana's income and corporate income tax rates, as well as the elimination of the inheritance tax:

Republican Mike Pence is looking at ways to cut Indiana income tax rates across the board if elected governor next year.
The congressman told The Associated Press on Wednesday that he wants the state's individual and corporate tax rates reduced to 3 percent. The state's individual tax rate is now 3.4 percent and the corporate rate is 8.5 percent.
Pence also said he would like to repeal Indiana's estate tax.
But the state's surplus would need to grow more before tax cuts would become viable, Pence said. He didn't give a specific level the state would have to reach first.
“Any surplus net of adequate reserves should be used for pro-growth tax reform, not more government spending,” Pence said.
While Pence was busy in Congress pretending to fight for balanced budgets, the Indiana General Assembly this year approved a new law reducing Indiana's corporate income tax rate gradually from its current rate of 8.5% to 6.0%. Pence relies on the current occupant of the office's claim that Indiana currently is running a $1.2 billion surplus, which is simply not the case. I hate to disappoint my fellow Republicans, but Indiana is indebted to the federal government for over $2 billion for paying benefits to our unemployed after our state unemployment insurance fund went broke very early on in the current recession because Indiana lawmakers cut tax rates paid by businesses while increasing benefits paid to unemployed workers. That debt is only growing. The state also has billions of dollars in unfunded pension obligations. At the rate we're going, our state employees retirement fund will be broke within 8 years.

I'm all for lower taxes, but the state has to figure out how to address its unfunded obligations before giving up a surplus that exists on paper only through creative accounting methods. Pence had the luxury of voting this week to allow the federal government to borrow another $2.4 trillion so the federal government could continue to run up the largest budget deficits in our nation's history without making any specific tax or spending decisions or a concern in the world as to how our nation's current debt, let alone this mountain of new debt, could possibly ever be repaid. Even worse, he supported a plan that gives unconstitutional authority to a "Super Congress", a select few members chosen by the leadership of both houses, which will get to make future tax, spending and borrowing decisions over the wishes of the majority of members elected to the Senate and House. That single vote wiped out any credibility he had as a true fiscal conservative. This is 2011, Mike, not 1787 when states still had the ability to print their own money with calamitous results. Sorry, Mike. Actions speak louder than words.

Judge Andrew Napolitano sounds off in the video below on why he believes the Budget Control Act passed by Pence and his fellow colleagues is unconstitutional.


rohshack147 said...

Bravo Gary! Thanks to you for bringing this matter to the publics attention! You are now the first and so far as I know only republican blogger to say that the states surplus is an illusion. I wonder what Paul Ogden thinks about all this? I wish the media would give more attention to the UI Trust Fund and how this administration and others have bungled it so badly. The claim that this is all due to the economy is crap! I think you and Paul should look further into the Trust Fund. You will be surprised at what you will find. Ironaclly one of the individuals most responsible for the mess at DWD Ron Stiver still somehow has avoided serious scrutiny.

Jeff Cox said...

I've been wondering myself how this "Super Committee" is constitutional.

Bradley said...

Luckily for Daniels, the unemployment debt is covered by the state's employers and doesn't have to be included in his budget calculations. Now, the employers and taxpayers of the state do pay for the errors of Daniels' DWD. Most non-government employers have to pay increased taxes now (on top of joining all Indiana employers in having overpaid claimants $1.157 billion in a 4-year period). All these employers also have to pay $21/per employee this year and increasingly so in the future because Indiana was the 2nd state to go bankrupt (only Michigan and South Carolina pay this tax currently).

Taxpayers foot the bill by paying for former government employees who don't deserve to be paid but are allowed to be paid by DWD (and taxpayers can pay up-to 100% of these employees' unemployment). Taxpayers might also have to pay up-to $100 million for the Trust Fund debt's interest by the end of this year (with much more to come in future years). I haven't heard how that'll be paid for this year, but the first $60 million is due by the end of September.

Hilariously, the same people who have allowed this trainwreck to happen at Daniels' DWD (calling themselves "The Lead Team") also are the same ones forecasting that the news laws passed by the General Assembly this year will eliminate the current $2 billion debt, with interest, and restore the TF to solvency by 2020. Call me skeptical. Right now, Indiana has the 8th highest amount of debt to the US for its TF.

When all the thousands of unemployed claimants who shouldn't have been paid go onto the extension claims (called EEUC), employers are further socked because they are the ones who have paid for those extensions. The federal government's TF is itself in debt and has to transfer money from other places in the US budget to it, which is why Indiana employers have to pay $21/per employee right now to help pay for the extensions to start to restore the US TF.. The US government has to take-on more debt to pay for its own insolvent TF.

So Daniels has actually added to the federal debt even though he likes to pretend he is a fiscal crusader. He's a fiscal fraud.

rohshack147 said...

Also I think it needs to be pointed out that alot of the problems the state faces with its pension liablilities especially the Teachers Retirement Fund are because of Evan Bayh's weaknesses as Governor. Cady points this out to some extent in his book Deadline Indianapolis. I know Evan Bayh is yesterdays news. But I would love to see you and Paul go after him more especially for some of his shenanigans as Governor. Interestingly enough are current Governor claims that the state has no unfunded liablities of any significance. Although Jeff Espich and Luke Kenely admit the state does. And to Kenely's credit he has at least been willing to discuss the states fiscal problems somewhat. Also I would love your thoughts Gary on just how the state plans to pay back the feds the $2 Billion plus we owe them for UI! Strangely economists have been warning about the structural problems of states and their UI funds since the mid 1980's but they have mostly been ignored.

Ben said...

Me thinks that Mr. Pence is hearing foot steps and is trying to catch up. He like other DC troglodytes, this that we don't se what he is doing. Mr. Pence, you are an empty suit and you were called out.

Paul K. Ogden said...

Rohshak, I haven't given it much thought yet. Trying to get some work done today.

I am all for getting rid of the inheritance tax. That tax raises very little revenue and takes awhile to figure out. By the time you figure it out, the client owes you more for attorney's fees than the tax. Yet you have to do it on every estate.

It's important for people to know the state inheritance tax and state estate tax are two different taxes. The state estate tax only hits the wealthy.

I am very happy with how Daniels has ran the budget. While I'm for cutting taxes, I think we need to be careful about those unfunded liabilities Gary is talking about.

artfuggins said...

I agree that the math of Pence doesn't add up! Imagine if he were the governor!!

Morning Constitutional said...

Only one of the above comments addressed the question discussed in the video clip, and then not much at least not yet.

While the judge raises some interesting constitutional points, I think he picks and chooses a bit in terms of what "rights" individual members of Congress have. For example, the right to filbuster, which isn't itself in the constitution (only a limited number of places the constituion requires a super-majority), and which is itself only a rule. And the constituion does make it clear that each house can adopt its own set of rules, which bucks up against other considerations. I guess the basic question is whether or not by law, Congress can "permanently" instituionalize a procedural rule, and since enactment of a law (and its repeal) requires the Executive branch participation (though arguably as part of a legislative function, not an executive one), that might be a valid constitional objection. Certainly not cut and dried.

The real issue is why, by constitutional means or ordinary law, does the Congress have to duck its responsibility by such devices?