Indiana recently hosted Vice President Mike Pence and President Donald Trump, each calling for comprehensive tax reform. The administration and national observers have rightly cited the nation’s woeful federal tax system as a drag on our economy, and many have recognized Indiana as an example of what responsible, pro-growth policies can achieve.
Indiana is recognized as one of the best places to start a business or raise a family. CNBC ranks it second in the nation for cost of doing business. Publications, including Chief Executive Magazine, and think tanks, including the Tax Foundation, consistently rank Indiana first in the Midwest and among the top 10 nationally for our pro-business climate.
This has meant greater opportunity for all Hoosiers. Our 3.5 percent unemployment rate is lower than that of all four bordering states and the national average. We outpaced both the nation and our neighbors in private-sector job growth every single month since the worst depths of the 2009 recession. From 2007 to 2017, Indiana’s inflation-adjusted personal income has grown faster than the national average.
This success story required a paradigm shift in state governance. In the early 2000s, Indiana was at the bottom of almost every economic outlook index. Our outdated regulations were burdensome; our budgeting practices were lax; our tax code made us uncompetitive. Partnering with three successive governors—Mitch Daniels, Mike Pence and current-Gov. Eric Holcomb—legislative leaders worked across the aisle to enact sweeping reforms. We made Indiana a right-to-work state, fixed our unemployment insurance system, and streamlined government and regulations.
Starting in 2006, we brought much-needed tax relief to homeowners and farmers. Constitutional property tax caps have saved taxpayers more than $5 billion. In 2013, we passed the largest tax cut in state history by eliminating the death tax and cutting the personal income tax. Of the 41 states with an income tax, Indiana is now the third-lowest.
We also repealed the inventory tax, eliminated the sales tax on R&D equipment, and made patent-derived income tax free. Starting in 2011, we began stair-step reductions to our 8.5 percent corporate and financial institution taxes. By 2023, both will be 4.9 percent, saving Hoosier employers an estimated $2 billion.
Indiana still funded its priorities. We passed four consecutive balanced budgets, maintained a $2 billion rainy-day fund, and earned a AAA credit rating. We’re investing more in K-12 education, addiction treatment, criminal justice reform and workforce development. We just enacted our state’s largest transportation infrastructure plan. Simply put, Hoosiers are the fiscal envy of the nation.
Congress can replicate this experience by enacting pro-growth tax policies. First, we need to drastically simplify our complex federal tax code. Average Americans are forced to use tax-prep services or software, while skyrocketing compliance costs hurt large corporations and small and medium-size family businesses. At best, this complexity leads to frustration and unintentional errors. At worst, it fosters confusion and fraud. Fewer loopholes, lower rates and a simpler bracket structure would go a long way for the American middle class.
Second, we must lower our crippling 35 percent federal corporate tax rate. This uncompetitive rate—the highest in the developed world—discourages job creation, stifles innovation and encourages homegrown companies to keep earnings overseas. For a state so reliant on high-tech investment and advanced manufacturing, the federal corporate tax rate is hurting Indiana disproportionately.
Indiana has proven responsible tax reform is achievable, and America can ill afford continued lackluster growth. The time for congressional action is now. We should all support the Trump administration’s efforts to fix our broken, uncompetitive federal tax system.•
Brian Bosma is the speaker of the Indiana House, where he represents District 88.