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News-Sentinel.com Your Town. Your Voice.

A cautious approach on tax-cut proposal

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.The Associated Press
Wednesday, November 21, 2012 12:01 am
Republican Gov.-elect Mike Pence has experienced a tough political truth, one he may have known but forgotten somewhere along the line: What you promise taxpayers is one thing. What you can actually deliver is quite another.Pence made a 10 percent income tax cut a major pledge of his gubernatorial campaign. But now the two top legislative Republicans – House Speaker Brian Bosma and Senate President Pro Tem David Long – are expressing serious doubts that the cut can or should be made. The government’s economic future, they argue, is not as certain or as rosy as the state’s $2 billion surplus might lead one to suppose.

The cut would reduce tax revenue by $500 million a year at a time when financial pressure is being felt from a number of sources:

Gambling revenue, once thought to be recession-proof, is down significantly and expected to continue decreasing.

The state is already committed to implementing two tax cuts passed earlier this year – phase-outs of the inheritance tax and corporate income tax.

Indiana’s 7 percent sales tax – one of the highest in the nation – already accounts for more than half the money in the state’s general fund. Cutting the income tax would put the revenue stream even more out of balance.

No matter how it’s done, Obamacare and related programs are going to cost the state a lot of money it isn’t spending now. There’s even a chance it can’t be done without a new tax.

There is already pressure to restore some funding from programs that have faced steep cuts, especially education funding.

“The fiscal fog is thick,” is the way Bosma puts it. “These are uncertain times.”

Bosma and Long are right to urge caution, and even the strongest fiscal conservatives should applaud them. Holding off on a tax cut isn’t a sin quite on the level as increasing a tax or instituting a new one. They also wisely counsel that the state should hold off on any new spending plans for the time being.

In the end, Pence may be right, of course. After studying the revenue streams and learning as much as we can about the economy of the next couple of years, a 10 percent cut in income tax might still be the best option. There are stimulative effects from any tax cut, and they will offset at least some of the economic pain inflicted on the state budget.

But the state can afford to back off a bit to consider all the angles. It can afford to take a careful approach to all spending and taxing decisions. As a matter of fact, it can’t afford not to.


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