Revenue forecast could swing Pence's tax-cut hopes

Back to TopCommentsE-mailPrintBookmark and Share

The state revenue forecast due out April 16 will be lawmakers' last bit of guidance before finalizing Indiana's next two-year budget, which so far does not include the 10-percent income-tax cut that is Gov. Mike Pence's top priority.

An improvement over the December forecast could give Pence leverage heading into the final two weeks of the legislative session ending April 29, but economists predict there will be little change.

“When you balance everything out, it probably won't be much different than December,” said Bill Witte, associate professor emeritus of economics at Indiana University.

The Dec. 17 forecast predicted revenue would grow a modest 2.55 percent over the next two fiscal years, which begin July 1. The projection put fiscal year 2014 revenue at $14.66 billion and 2015 revenue at $15.09 billion.

The State Budget Agency issues a two-year revenue forecast every December and a revised forecast every other April, coinciding with budget-writing years.

Pence would like to lower the state tax rate from 3.40 percent to 3.06 percent over two years, an estimated savings to taxpayers of $795 million in that time. House and Senate leaders are concerned about the possible revenue reduction and have different priorities.

The House budget proposal included no income-tax break and increased spending on education and roads. The Senate would spend similar amounts in those areas, but also cut the income tax from 3.40 percent to 3.30 percent while eliminating the state inheritance tax and financial institutions tax.

Without a much-improved forecast, a compromise could be difficult.

The federal fiscal cliff, which was looming in December, didn't play out with the drama that some feared, but it is having a negative effect on the national economy, Witte said. Consumers have begun to feel the hit of a payroll-tax increase, and many federal workers are set to be furloughed this spring.

At the same time, the housing market is recovering, Witte said, and the automotive sector, which has a heavy presence in Indiana, continues to grow.

Another positive development is that Indiana's employers have added to their payrolls faster than the nation's as a whole, said Ball State University economist Mike Hicks. “But we're not doing well enough to suggest we're going to have a starkly different forecast," he added.

Hicks thinks the April forecast will be better, but not "significantly better."

Pence doesn't need a glowing forecast to argue that his tax cut would stimulate Indiana's economy, said Ed Feigenbaum, publisher of Indiana Legislative Insight.

“This would put more money in the pockets of Hoosier consumers, Hoosier taxpayers at a time when we need to be doing that,” he said. “That's what he's been saying all along. This just reinforces that.”

Not more than a “handful” of lawmakers favor the Pence tax cut, Feigenbaum said, and those few seem more convinced of the political gain than Pence's economic stimulus argument.

Indiana Chamber of Commerce President Kevin Brinegar said a postive forecast would help Pence make his case, but he doesn't think it will be so. "I'd probably bet it's going to be about the same," he said. "There hasn't been any dramatic change in the economy."

The chamber backs the Pence tax cut because it would help more than 80 percent of Hoosier businesses that pay taxes, based on their owners' personal income.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.