House GOP budget advances without Pence tax cut

Gov. Mike Pence’s proposal to lower Indiana’s income tax rate didn’t get a vote Tuesday – but a new state budget that drops that tax cut in favor of extra funding for schools and roads did.

A state Senate panel debated two tax cut measures: One that would carry out the new Republican governor’s plan to lower the individual income tax from 3.4 percent to 3.06 percent over two years, and one that would drop the rate to 3 percent over four years.

There was no vote, though, and several of the committee’s members said they will proceed with caution – only giving the tax cut serious consideration if a new revenue forecast predicts an unexpected economic uptick before the April 29 deadline for lawmakers to approve a new budget and adjourn for the year.

“This is not a conclusion of the discussion,” said Senate Tax and Fiscal Policy Committee Chairman Brandt Hershman, R-Buck Creek. “There’s an opportunity to continue this discussion as the revenue picture becomes clear to us.”

The budget-writing House Ways and Means Committee, meanwhile, approved House Republicans’ two-year, $30 billion spending plan. It increases education funding by 2 percent in its first year and 1 percent in its second year and tucks in an extra $250 million per year to beef up state and local transportation funding.

Its omission of Pence’s tax cut – a decision in which the governor said he was “very disappointed” – sets the stage for an intraparty battle that is testing whether Pence has the political capital necessary to achieve the top goal on his first-year legislative agenda.

Advocates of the tax cut included Sen. Mike Delph, the Carmel Republican who is carrying the governor’s proposal.

He told the committee that as the federal payroll tax increases by 2 percent this year, lowering Hoosiers’ income taxes by 0.34 percent would help offset the new burden – and keep $520 million in taxpayers’ pockets each year.

“It would have a cascading, dynamic flow, and it would inject a half a billion dollars into the Indiana economy,” Delph said.

Key legislative leaders, including Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said they view the issue in a broader context.

Indiana is already phasing out its inheritance tax – a move that will be completed by 2022, but that lawmakers say they might consider speeding up.

“It just seems like we ought to finish that job,” Kenley said.

Sen. Lindel Hume, D-Princeton, also said the state also owes pension money to teachers who entered the profession before 1996 – and is requiring businesses to pay higher taxes to repay more than $2 billion borrowed during the recession to bolster Indiana’s unemployment insurance fund.

He said income taxes are a “regressive tax” because poor Hoosiers have to spend more of the money they earn, while wealthier Indiana residents can save more. Instead, he said, the state should consider cutting its sales tax – or should keep its taxes at their current levels.

“We have things that government really needs to do. Education is a terribly important part of government, and roads – the infrastructure of this state – are very important not only to our people but also very important to businesses that look at locating in Indiana,” Hume said. “Some of those things are more important than taxes.”

Pence has pitched the income tax cut as one that would help the 92 percent of Indiana businesses that file as individuals.

Business groups that are traditionally powerful Republican allies, though, offered lukewarm support for the tax cut.

Indiana Manufacturers Association lobbyist Tim Rushenberg said the proposal has his orgnaization’s “guarded support. Indiana Chamber of Commerce lobbyist Bill Waltz said the group “cannot not” support a tax cut, but that education and roads are vital to Indiana’s economy as well.

Other groups, including the Indiana Family Institute and Americans for Prosperity, said they support the tax cut.

“We support lowering the tax burden on Hoosier families and small businesses, and that includes lowering the individual income tax rate here in Indiana,” said Eric Miller, the head of Advance America. “It’s a good thing to let Hoosier families and small businesses keep more of their hard-earned money.”

Hershman said he won’t schedule a vote on the tax cut proposals that were the subject of his Tuesday committee hearing. The budget, meanwhile, moves to the full House floor for a vote in the coming days.

Tort reform becomes Pence’s first legislative loss

Gov. Mike Pence was dealt his first loss Thursday when a state senator gave up his efforts to push a “loser pays” tort reform bill that was part of the Republican’s first-year legislative agenda.

Sen. Mike Delph, the Carmel Republican who was carrying the measure on Pence’s behalf, filed a motion to pull the bill from further consideration this year. He said he will focus instead on the governor’s proposal to lower Indiana’s income tax.

“I went and spoke with the governor’s office and we agreed it would probably be best to withdraw it and revisit the issue sometime in the future,” Delph said.

The bill would have required the losing side in all civil litigation to pay the winner’s attorney fees and other costs – an idea championed by the U.S. Chamber of Commerce, but that Indiana-based business groups have not sought.

The issue proved tricky for Pence. His staff asked Delph to carry the measure on the governor’s behalf – but since then, Pence has steadfastly refused to address on it.

His press secretary, Kara Brooks, said “no” when asked if the governor’s office would react to Delph’s decision. Pence’s staff has similarly answered other questions about the roposal in recent weeks.

Pence was asked about the bill on the WFYI-Indianapolis television program “Indiana Lawmakers,” and said only that his campaign’s “Roadmap for Indiana” – which does not include tort reform – “was by no means intended to be exhaustive.”

Delph is also the lead author of Pence’s proposal to lower Indiana’s individual income tax rate from 3.4 percent to 3.06 percent.

A co-author is Sen. Brent Steele, the Bedford Republican who chairs the Senate Judiciary Committee, where the tort reform bill had been assigned. Delph said Steele opposed the tort reform proposal.

“I didn’t want to put him in an awkward spot, and I know the governor doesn’t want to put him in an awkward spot – especially when he’s one of the co-authors of the tax cut proposal,” Delph said.

Delph said his focus will be on pushing that tax cut for Pence. “That’s his top priority,” Delph said, “and that’s my top priority to try to help him.”

Confusion over Pence’s approach to tort reform continues

During a news conference Thursday, Republican Gov.-elect Mike Pence held his “Roadmap for Indiana” in the air, pointed to it and said it “will be enough for us to focus on” in terms of his 2013 legislative agenda.

Later that day, state Sen. Mike Delph, R-Carmel, said he’s carrying Senate Bill 88, a tort reform measure that would require the losing side to pay all legal fees in civil litigation because Pence’s team asked him to. That “loser pays” proposal is nowhere to be found on Pence’s roadmap.

So is tort reform part of Pence’s legislative agenda?

On Thursday, his spokeswoman did not respond to requests for comment on the issue.

On Friday, Pence cancelled interviews with multiple media outlets, including the Courier & Press. But he spoke with the Fort Wayne Journal Gazette’s Niki Kelly, who tweeted that he did not answer a direct question about whether he is pushing tort reform. “Our legislative agenda is a work in progress,” he said.

The Indianapolis Star’s Mary Beth Schneider reported in Friday’s paper that Pence’s incoming chief of staff, Bill Smith, said “there’s a difference between having a focus on something and having a position on things” — an implication that Delph’s tort reform is just one of many ideas to come from a legislator that Pence might support.

But Delph told The Star that “a member of Pence’s staff asked me to do it.”

“This was not on my radar till they asked me to do it. I’m just trying to be supportive of the governor-elect,” Delph said.

Pence spokeswoman Christy Denault on Friday afternoon declined to address Delph’s bill specifically and said the governor-elect’s team will roll out his legislative agenda once he takes office next week.

“We’ve talked to a lot of different legislators about a lot of pieces of legislation. We’ll be prepared week one to start talking about specifics of that legislative agenda,” she said.

Delph is also the lead author of one of Pence’s very top priorities: A bill that would cut Indiana’s individual income tax from 3.4 percent to 3.06 percent.