Governor and State Government and Taxes and Elections and Politics and Government & Economic Development and Government

Hoosier politicians offer tax cuts for all stripes

August 12, 2012

When it comes to putting money back in taxpayers' pockets, not all tax cuts are the same.

Hoosiers have a pick of candidates looking to succeed Gov. Mitch Daniels who are ready to slash their taxes for them. Republican Mike Pence has proposed cutting the state's personal income tax by 10 percent, and Democrat John Gregg wants to eliminate the state's sales gasoline tax and the corporate income tax for companies with physical headquarters in Indiana.

There's no doubt that just about every Hoosier politician wants to cut state taxes.

"Past some point of safety, it's better to leave the money with the taxpayer who earned it than let it burn a hole in the pocket of government," Daniels said before setting off on a motorcycle rally from the Statehouse. The comment won him plenty of applause from assembled motorcyclists joining Daniels for his "last roundup" as governor on a ride to French Lick.

Workers commuting between Indianapolis' doughnut counties and downtown Indy might get more out of Gregg's proposal if they earn around $50,000 a year and drive an SUV. Make that commuter a lawyer in a Toyota Prius and the Pence plan starts to look more appealing.

Analysts with the liberal group The Institute on Taxation and Economic Policy weighed in on Pence's plan last week, saying it would give more money back to richer Hoosiers. (Someone earning $250,000 a year will obviously get back more money from an income tax cut than someone earning $40,000.)

That prompted Gregg to blast the Pence measure as a handout for the wealthy.

"Any proposed tax cut should be fair to all Hoosiers, while also improving Indiana as a place to live and work," Gregg spokesman Daniel Altman wrote in an emailed response to questions. "That is why John has proposed tax cuts that will benefit all Hoosiers, ease the pain at the pump, spur job creation and help middle class families offset the costs of daycare."

The Pence team, relying on information from The Tax Foundation, a conservative group, points out that on the surface it may seem like anyone earning six figures is well-off, but many small businesses file using the income tax, rather than incorporating. Therefore, Pence says, cutting the income tax would help both workers and business owners.

"Mike Pence's proposed tax cut is pro-taxpayer and pro-business," Pence spokeswoman Christy Denault said in an email. "Mike's plan increases take-home pay for Hoosiers and provides permanent relief for our small businesses."

If this sounds achingly like the presidential battle being waged between President Barack Obama and former Massachusetts Gov. Mitt Romney and the split between Congressional Democrats and Republicans, it should. It's almost an exact mirror of the wars being waged in Washington.

Democrats, like Gregg, say taxes should be "fair," while Republicans, like Pence, say taxes are an ailment that calls for "relief." Congressional Democrats balk at extending the Bush-era tax cuts for anyone making more than $250,000 a year, while Republicans accuse them of killing jobs.

Indiana candidates just tend to be more genial.

There's been no lack of tax-cutting in Indiana over the last few years. Lawmakers approved a phase-out of the state's inheritance tax earlier this year and a large cut in the corporate income tax last year.

They also put in place new controls to either trigger refunds if the state accumulates enough money, as is the case with Daniels' automatic tax refund, or limit how much property taxes can be raised (though they paid for the latter measure with a hike in the state sales tax).

The numbers can be eye-numbing, but the principles are simple.

Consumption taxes, like the sales tax and gas tax, place more of the cost of government on poorer residents. Liberals, meanwhile, hold up the income tax — and, increasingly, taxes on investments, like the capital gains tax — as a means for redistributing wealth.

In November, there will be a choice for just about everyone depending on who they think should pay for things like education and roads.

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