Sunday, December 16, 2012

Pence Proposed Tax Cut Mostly Benefits The Wealthy

A study of a state income tax cut proposed by Governor-elect Mike Pence shows the largest benefit will go to Indiana's wealthiest. During the campaign, Pence pledged to reduce the state income tax rate from 3.4 to 3.06%, returning nearly a half billion dollars in tax revenues to Indiana taxpayers. The top 20% of income tax earners would receive 56% of the tax savings according to the Institute on Taxation and Economic Policy. Those earning more than $325,000 a year would receive a tax cut of $2,264 under Pence's plan. Middle income earns making between $33,000 and $53,000 would receive an average tax cut of 102, while the lowest income earners would receive no tax cut.

The federal government would collect about $50 million more from Indiana taxpayers because of a lower deduction on their federal tax return for state taxes paid. The study is critical of Indiana's low exemption, which is only $1,000, the same amount it was when the state's income tax was established in 1963. If the exemption had been adjusted for inflation over the years, it would have risen to $7,500 according to the study.

Republican leaders in the House and Senate have expressed skepticism about enacting Pence's tax cut due to uncertainty over the economy and state revenues. A poll taken by Ball State University last month indicated that only 31% of Hoosiers favored an income tax cut, while the vast majority, 64%, opposed. Pence plans to push ahead with his tax cut proposal. "I believe, with all my heart, that with the largest surplus in our state's history that we have the ability to maintain the fiscal integrity of our state, strengthen our reserves, fund our priorities and provide Hoosiers and Hoosier businesses tax relief that will create jobs," he said.

Read more about the new tax study at the Northwest Indiana Times.

1 comment:

Pointman said...

Percentages are equal across the spectrum so little else matters unless so-called conservatives are going to embrace progressive rates, something we have so far avoided in Indiana.

I love the idea of showing yet further proof that higher rates doesn't mean higher revenues. And that a state can prosper while living within its means.

That said this rate cut really is a drop in the bucket compared to the overall tax burden of the Hoosier tax payer. I think I would rather see my few hundred dollars put to things like county roads, job training programs, overloaded animal shelters.

Where I don't want to see it go is back into that sink hole of public education. The whole "we are the only ones.." argument we get from that quarter has closed that door for me. and If that's the only political option then give it back to me and I can donated it to the needs I see in my own community - which may not be the same county to county or community to community..