State Government and Taxes and Government & Economic Development and Government

Tax collection woes raise concern among leaders

March 7, 2014

A steady decline in tax collections is raising concerns among Indiana budget leaders about the overall fiscal health of the state.

New revenue estimates released by the State Budget Agency Friday showed the state pulled in $54 million less in taxes last month than planned. Gov. Mike Pence blamed the results in part on depressed consumer spending because of the harsh winter which hit Indiana, along with much of the rest of the nation.

But Senate Appropriations Chairman Luke Kenley, R-Noblesville, noted that collections for the eight months of the current budget year have come in consistently under expectations. Last month, the state's sales tax collections came in about $20 million less than expected and collections from the personal income tax fell $65 million short of expectations.

In total in the first eight months, the state has fallen about $90 million short of expectations, and depressed collections from the personal income tax have accounted for much of that drop. Kenley, who operates as the Senate's budget chief, said that tax collections have come up about $60 million short of what they were at the same point in the last budget year.

"Probably even more concerning to me is we're behind our revenues in fiscal year 2014 than in fiscal year 2013," Kenley said, referring to the annual budget years, which run from July 1 to June 30. "So we're behind year to year, and that's sort of in contradiction to the national economy."

But he was quick to note that the state's corporate income tax, which is being scaled back in the next few years and is under consideration for a further cut by lawmakers this year, has been coming in stronger than expected.

Pence issued a two-sentence statement Friday afternoon blaming the fiscal troubles on a severely harsh winter that froze consumer spending throughout the state.

"Due to severe winter weather that affected Hoosiers all across the state, this revenue report was not unexpected. Our administration is confident that we will be able to manage budgetary resources in a way that preserves Indiana's fiscal integrity," Pence said.

The tax collection troubles are accentuated by the fact that they are coming in under more dour estimates set by state forecasters in December. Pence, at the time, cut state agency budgets and put the state plane up for sale. The dour budget picture has also made it harder for Pence to sell lawmakers on new spending included in his 2014 agenda, from a preschool voucher program to a call to cut the state's business equipment tax.

Leading Democrats said it's time to apply the brakes on any major spending decisions. Rep. Greg Porter, the top Democrat on the House Ways and Means Committee, singled out the broad call from Republicans to cut business taxes.

"At the very least, we need to stop this incessant chatter about cutting more and more taxes for corporations," he said in a statement. "If anyone needs relief, it's the people who create the profits for these corporations: the middle class families across Indiana who are the ones really suffering. Let us focus on them as we gauge the fallout from the downturn in revenue."

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