Indiana Gov. Proposes Regressive Tax Cut Even Republicans Say The State Can’t Afford

Indiana Gov. Mike Pence (R) used his State of the State speech this week to propose a 10-percent income tax cut that would cost the state so much money that even leading Republicans won’t support it. Pence’s proposal would cut the state’s income tax rate from 3.4 percent to 3.06 percent, a plan that follows up on corporate tax cuts and a phasing out of the state’s inheritance tax.

Indiana currently has a budget surplus, but it is one that was built largely on spending cuts to programs that benefit the state’s neediest residents. Pence’s plan would only exacerbate that problem, leaving Indiana with too little money to fully invest in education and other programs, state House Speaker Brian Bosma (R) told WISH TV:

To cut taxes the Pence budget will give schools spending increases of just 1 percent and Speaker Bosma says that not enough.

“We’ll probably invest more in that direction,” he said. In comments made in his Statehouse office Bosma also said the state needs to spend more on highway funding suggested there may be no middle ground between his position and the governor’s.

It may be difficult to invest in all the critical needs we have before us and still accept the governor’s tax cut proposal,” he said. “That doesn’t mean it’s off the table.”

While Pence pitched it as a tax cut for every Indiana citizen, the Institution of Taxation and Economic Policy found that about 12 percent of Hoosiers, most of them low-income, would see no benefit from Pence’s plan. The plan is also wildly regressive, providing more than half its benefits to the wealthiest 20 percent of Indiana taxpayers. The average tax cut for the state’s top 1 percent would be more than $2,200, while the average middle-income taxpayer would receive just $102. The poorest 20 percent, ITEP found, would receive an average tax cut of just $18.

Republicans have proposed a compromise plan that would still provide large tax cuts and make Indiana the latest state, along with North Carolina, Louisiana, Kansas, and Nebraska, where Republicans are pushing tax cuts that largely benefit the wealthy.