Under a budget plan announced by Senate Republicans yesterday, they're willing to give Pence a little of what he wants. Their proposal would reduce the state income tax rate 3% from 3.4% to 3.3%. That's better than nothing, but it would only offset a third of the tax increase that Mayors Greg Ballard and James Brainard are trying to enact for those living in Central Indiana to create their multi-billion dollar mass transit boondoggle. The Senate's modest tax plan would save a family of four earning taxable income of $67,296 about $68 a year. Pence told reporters that he's encouraged by the Senate Republicans' budget plan, but he still wants his 10% tax cut, which would reduce that tax rate to 3.06% and save family about $228 a year.
“I continue to believe that in these tough economic times we ought to do all we can to provide permanent tax relief to working families, small businesses and family farms,” Pence said. “I hasten to remind people that lowering the personal income tax rate not only puts dollars in the pockets of every Hoosier...but secondly remember that more than 80 percent of small businesses file their taxes under the individual income tax rate.”Pence's tax cut plan would reduce state income tax revenues about $521 million annually. The state is currently running a surplus of about $2 billion. The Senate plan reduces state income tax revenues about $150 million, but it also eliminates the state inheritance tax, which is currently being phased out over a 10-year period and cuts the financial institutions tax. Those two tax reductions reduce state tax revenues by about $150 million and $20 million, respectively. The Senate Republican plan would put $200 million more towards transportation funding. All competing plans provide more spending for education. The House plan provides $337 million more (plus a $300 million reserve fund) compared to $263 million under the Pence plan and $331 million under the Senate plan.