Nearly two months before Gov.-elect Mike Pence takes office, legislative leaders from his own party have already expressed reservations about his campaign pledge to give Hoosiers a 10 percent cut on state income taxes.
At a legislative preview conference last week, Senate President Pro Tem David Long expressed caution about the tax cut, which would cost $500 million. He noted that lawmakers already have to decide how to make up for a phased reduction of the state corporate income tax and phased elimination of the state inheritance tax. Gambling revenue also is down.
House Speaker Brian Bosma was even more doubtful, noting that the previous balance between sales and income taxes already is out of whack, suggesting the state relies too much on sales taxes. An income tax cut would only exacerbate the imbalance.
Hoosiers have other reasons not to be optimistic about a state income tax cut. A $500 million tax cut would have to be accompanied by a spending cut of an equal or nearly equal amount after state government has already slashed state spending to the detriment of the most vulnerable Hoosiers. And some lawmakers rightly advocate for new spending on preschool education, an area where Indiana sorely lags other states.
Pence’s proposal also must be put into perspective.
A 10 percent cut of Indiana’s income tax rate of 3.4 percent would be just over one-third of 1 percent. For a household making the average income of about $35,000, that would be a cut of just $2.29 a week.
Certainly, any tax cut is often welcome. But Hoosier lawmakers in the past have failed to save surplus revenue when times were good, only to find the state coffers short when the economy slipped. Perhaps Pence’s administration and lawmakers will find a way to make such a cut work. But a campaign promise that butts up against contrary reality is one that should not be kept. And Pence’s promise appears to be contrary to the state’s best interests.