EDITORIAL: Time for Pence to ditch tax cut

December 29, 2012

Incoming Indiana Gov. Mike Pence may have spent a decade as a U.S. representative. But he is a neophyte when it comes to managing the state budget—unlike legislative warhorses such as Speaker of the House Brian Bosma and Sens. David Long and Luke Kenley.

We bring up the three—who, like Pence, are Republicans— because they’ve all reacted skeptically to his push to give Hoosiers a fat tax break, a proposal that was the centerpiece of his successful gubernatorial run.

Bosma told The Indianapolis Star this month, “The key [to a tax cut] is sustainability, and not through an election cycle but for the long term. And that’s difficult for newly minted elected officials, wherever they be, to grasp.”

Kenley, who chairs the budget-writing Senate Appropriations Committee, told the Evansville Courier & Press that he was “somewhat thankful for the speaker’s cautionary tone” about tax cuts.

“I think he’s just trying to be realistic—there are a lot of unknowns out there,” Kenley said.

On the surface, Pence has a compelling argument for why lawmakers should pull the trigger on a 10-percent reduction in personal income taxes, a move that would cost $500 million a year. While crisscrossing the state in his pickup truck campaigning, he emphasized that Indiana is sitting on $2 billion in reserves, the largest cushion in its history.

But what Pence doesn’t acknowledge are the unprecedented fiscal uncertainties hanging over the state—including costs from the full phase-in of federal health care reform, and potential lost gambling revenue caused by new casino competition in Ohio and Illinois.

Then there’s the fact that these kind of tax cuts don’t make a lot of sense. As IBJ reported in October, economists and fiscal experts say one-off tax cuts do little to get the economy humming and create jobs.

Tax cuts are usually good politics, of course. But in this case, support among rank-and-file Hoosiers looks tepid. A December poll conducted for WISH-TV Channel 8 and Ball State University found just 31 percent of taxpayers favored the idea of a cut. Sixty-four percent, almost two-thirds, would rather see the money go to education and work-force training.

Normally, it’s admirable for a candidate to try to follow through on his pledges once he wins office. But in this case, the cool reception Pence is getting from voters and fiscal experts in the Legislature should serve as a wake-up call.

Sure, Pence would take some flak for setting aside his call for a tax cut. But unlike the long-term fiscal trouble he could cause by pressing ahead, the fallout would be fleeting.•


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