Tuesday, July 31, 2012

Pence Proposes 10% Cut In Indiana's Income Tax Rate

Republican gubernatorial candidate Mike Pence announced his first major state finance proposal today. He wants to cut the individual income tax rate by 10%, providing the largest income tax cut in Indiana history. Pence would reduce the individual income tax rate from 3.4% to 3.06%. The average family of four would save about $228 a year in taxes. A small business owner with a net income of $300,000 would save about $1,000 a year.
"The time has come to cut taxes for every Hoosier, in the city, in the factory and on the farm," said Pence. "We will make Indiana the most attractive place in the Midwest to start a business, grow a business, or get a job."   

"I believe strongly that when government has too much money, it needs to return that money to taxpayers who first earned it," said Pence. "Thanks to Governor Daniels, we are in such a positive fiscal condition that we can afford to do that on a permanent basis."

Pence says that the tax cut would reduce state revenues by about $533 million a year, but he says Indiana would benefit from having the lowest effective tax burden in the Midwest. Even with the tax cut, Pence says that he believes tax revenues will exceed expenditures by a little more than a billion dollars over the next two years. Indiana's current budget surplus is about $2 billion if you discount the fact that the state's public pension systems are grossly underfunded and the more than $2 billion the state borrowed from the federal government after the state's unemployment insurance trust fund went broke at the beginning of the recession that started in 2008. Current Indiana law already requires the state to refund to taxpayers half the surplus in excess of 12.5% of appropriations and half of that amount to paying down the state's unfunded pension liability.

Pence's Democratic opponent, John Gregg, welcomed Pence to the tax-cutting argument that he has already put forward. Gregg earlier proposed the elimination of the sales tax on gasoline, which he says would save the average family between $261 and $522 annually, and result in a loss of state revenues of about $540 million. Gregg told the Star's Mary Beth Schneider that his tax cut plan was "more significant" than Pence's tax cut plan.

I'm all in favor of keeping taxes as low as possible, but I wonder how wise Pence's and Gregg's tax cut proposals are at this time. The surplus can disappear just as quickly as it appeared if the recession takes a double dip as it appears it may, and the surplus really just exists on paper by excluding the state's outstanding obligations. Gov. Daniels will also have spent all of the money realized from the leasing of the state's toll road by the end of his term and the state will face difficult challenges in keeping up with its transportation needs.


CircleCityScribe said...

I wish that he would remove the sales tax on utilities instead! I absolutely cannot understand why there is a tax on water, natural gas, phone, and electric.

Keep the income tax, it's fine, but stop taxing utility service! We have no choice but to pay for utilities and taxing them is just wrong.

M Theory said...

We could eliminate a lot of taxes on necessities like property and utilities IF we re-legalized marijuana (which is a mild harmless and very helpful drug) and taxed it instead.

No one has ever died as a result of marijuana, however Big Pharma kills an estimated 100,000 to 250,000 people a year.

Big Pharma's drugs may be tied to to the psychosis of the recent Holmes' movie theater killings.

Already Big Pharma lawyers are scrambling to find loopholes to keep the evidence of a heavy prescription drug history out of the record because their huge profits are more important to them than public and individual safety.

Here is the story if you are interested in learning how Prozac and other drugs may have led Holmes to a psychotic break.


Had Enough Indy? said...

I can't see tax cuts, either. It smacks of pandering by both candidates.

Maine said...

I recall that after the toll road deal was finalized that the Governor or his budget director seemed to suggest that a large potion of the toll road money would be used to generate a revenue stream for future projects. But poof, its all gone within the Governor's tenure.