Pence to Include 10% Income Tax Cut in First Budget
Unless Indiana Governor-elect Mike Pence has a change of heart, expect him to include his proposed 10-percent income tax cut in the first budget he submits to the General Assembly.
The tax cut was one of the cornerstones of Pence’s campaign promises. However some Indiana lawmakers have expressed concerns that such a tax cut might not be sustainable in light of a weak economy and the state already cutting the corporate income tax and phasing out the inheritance tax.
In a news conference last week announcing members of his cabinet Pence said that because of Indiana’s strong fiscal position lawmakers have a number of choices and for him one of those choices is tax relief. Pence said his priorities include tax relief for Hoosiers and that his first budget will reflect those priorities.
Pence has maintained that the state can afford the tax cut and still keep 12.5 percent in reserves. In a white paper, Pence makes the assumption that state revenue will grow approximately 2.5 percent annually and appropriations will stay at 1.5 percent. This would create estimated budget surpluses of $426 million in 2013, $516 million in 2014 and $667 million in 2015.
The phase in of the income tax cut would cost $261 million in 2014, leaving $255 million for reserves and $534 million in 2015, leaving $133 million to be placed in reserves. Pence argues that even with the tax cut, the state would still have a higher percentage in reserves than the recommended 12.5 percent. His team estimates a 14 percent reserve in 2013, 14.3 percent in 2014 and 15 percent in 2015.
Also by phasing in the tax cut, Pence says lawmakers can see how it impacts the state’s bottom line and make adjustments as needed.
A copy of Pence’s tax proposal can be found here.
