Pence’s potential income tax cut buster: Transportation

Gov. Mike Pence’s budget – the major focus of his State of the State address Tuesday night – would pump state dollars into transportation and infrastructure only after Indiana’s surplus tops 12.5 percent of what it spends in a year.

Pence’s budget team estimates that would be worth $347 million over the next two years, but state legislative leaders said they’re more likely to deal with transportation funding in the actual budget, rather than through a trigger mechanism using the surplus.

Pence’s proposal “gives me a bit of pause,” said House Speaker Brian Bosma, R-Indianapolis. “Many of us that have been through this for a while see that we have larger needs than just to rely on a surplus. … Personally, I hesitate to just rely on expected reserves on that because it relies on economic growth.”

Senate President Pro Tem David Long, R-Fort Wayne, said he is similarly wary about Pence’s transportation funding plan.

“We need to find a permanent, sustainable course,” Long said. “I’d like to see a more permanent source for that funding if we can find it.”

Bosma added: “You can’t declare yourself the Crossroads of America without investing in transportation and infrastructure.”

Pence is pushing hard for a 10 percent cut in Indiana’s individual income tax rate. While lawmakers have said they desire to fund education at a higher level than the governor is proposing, transportation funding could be its most significant obstacle.

Buck sees income tax bill as ‘fallback’ to Pence’s plan

If Gov.-elect Mike Pence doesn’t get the individual income tax cut he wants, state Sen. Jim Buck, R-Kokomo, believes he’s found a “good fallback option.”

Pence campaigned on the pledge to step Indiana’s income tax down from 3.4 percent to 3.06 percent over a two-year period. However, legislative leaders have bristled, saying they are not sure the state can afford it as Affordable Care Act costs come online and education funding increases are considered.

Buck, meanwhile, wants to chop the individual income tax from 3.4 percent to 3 percent over four years – a time frame he said might be more palatable because it leaves extra room for adjustments along the way.

“It’s not meant to reject what the governor-elect is wanting to do. It’s just to provide a viable alternative should that become necessary,” Buck said.

His proposal is Senate Bill 192. He said he has not talked with Pence’s team about it, but that it received a warm reception from some of his fellow Republican senators.

“If not a substitute, it would be something that we could still meet during the legislative process where the governor could get his reduction and the legislature would figure out a way to start down that path similar to what we did with the corporate income tax,” Buck said.

He said he’s been pushing for years to lower Indiana’s income tax rate – a move he sees as essential to keeping the state’s cost of living low and keeping lawmakers from spending more money than necessary.

“I’ve been frustrated over the years that the state seems to be bragging about how much we squirrel away in our pockets, but we’re not doing much to help the ordinary taxpayer squirrel away more in their pockets,” Buck said.

According to a Legislative Services Agency analysis, Buck’s proposal would cost the state about $644 million per year in income tax revenue once it’s fully implemented in 2018.

Buck’s tax bill similar to Pence’s plan

State Sen. Jim Buck, R-Kokomo, has filed a bill that would step Indiana’s individual income tax down from 3.4 percent to 3 percent. The tax cut would be phased in over a four-year period, with the rate being lowered by 0.1 percent each year, starting in fiscal year 2014.

It’ll be Senate Bill 192. The bill would cost the state about $644 million in 2018, once it’s fully implemented, according to this analysis by the non-partisan Legislative Service Agency.

Buck’s proposal isn’t identical to a campaign proposal by Republican Gov.-elect Mike Pence, but it’s similar. Pence wants to cut the state’s individual income tax rate from 3.4 percent to 3.06 percent, and he wants to do it over two years.