Pence may get his $500 million, but not all in income tax cuts
The latest revenue forecast came out this week, and it estimated the state will receive $290 million more in revenue than the previous forecast. That, says Gov. Mike Pence, should be evidence enough for lawmakers who have so far been reluctant to endorse his proposed 10 percent cut to individual income taxes.
Good for him. State legislators talk a lot about this or that need for more spending, and sometimes taxpayers are the forgotten part of the equation. Pence’s steadfastness keeps taxpayers in the middle of this debate.
Unfortunately for Pence – and, alas, for taxpayers – legislators seem weary of the belt-tightening they’ve had to endure in recent years, so they aren’t exactly in a cutting mood. House and Senate versions of the budget are close together, and neither gives Pence his 10 percent.
The House version has no income tax cut whatsoever and proposes to spend more on education and transportation than Pence suggested. The Senate would spend between what Pence and the House want and include a 3 percent income tax cut. Pence says he is willing to slow down the pace of phasing in the 10 percent, but he still wants the whole amount.
Now the negotiating begins, and there is potential good news for taxpayers. The House is willing to speed up phase-out of the inheritance tax, and the Senate proposes to just end it outright. Neither body is inclined to give Pence the $500 million he wants all in income tax cuts, but there seems to be a movement to give him that much with a combination of cuts. Cutting corporate taxes, it has been suggested, would do more to boost the economy than an income tax cut. That is likely right, and we might add that knocking a penny off the sales tax might bring out a few consumers to do their part.
As we’ve noted before, this is a valuable debate to have, and Hoosiers are fortunate that the state’s finances are so good our legislators don’t have to focus on warding off bankruptcy the way some states do. Here, we can focus on fine-tuning the quality of life. How much happiness would come from increased spending power because of tax cuts? But how far can the state trim back the services it provides before the lack starts noticeably affecting us?
We tend to be absolutist about keeping government modest and spending low, so we’re probably draw that line much closer to Pence’s vision than the one seeming to be shared by most legislators. But it’s beginning to look like the line won’t be all that unpalatable no matter where it ends up.