Indiana Gov. Eric Holcomb proposed a tax cut for some businesses Monday that is decidedly less ambitious than what many of his fellow Republicans want to seek during the new legislative session.
Holcomb continued his cautious approach toward state finances ahead of legislators returning to the Statehouse for Tuesday’s start of the 2022 session. The governor also is facing disagreements with a Republican-backed proposal aimed at limiting workplace COVID-19 vaccination requirements and declined to say whether he supports adding political party identifications to what are now nonpartisan school board elections.
Projected booming growth in the state’s budget surplus has some in the Republican-dominated Legislature talking about possible individual income tax cuts that could reduce state tax collections by hundreds of millions of dollars. The governor’s proposed changes to the property tax on business equipment, meanwhile, wouldn’t reduce those tax bills for at least a few years.
Holcomb said he had concerns such as inflation, a possible slowdown in sales tax revenue as federal COVID-19 relief payments end and additional costs to attract and retain state employees in a competitive job market.
“I love that we’re in this position to talk about cutting taxes, we have a lot up in the air right now,” Holcomb said. “We’ll talk to folks and if we can be persuaded, we’re open minded about this.”
Officials estimate tax collections will grow nearly $1.9 billion, or 10%, more for this budget year than was expected when the current state spending plan was approved in April. That would push Indiana’s budget surplus to a whopping $5.1 billion, or 29% of state spending, by the end of next June.
Top Indiana House Republicans have suggested possible cuts to the state’s individual income tax rate or expanded credits to reduce what income taxes are owed. They’ve not yet released a proposal but lowering Indiana’s individual income tax rate to a flat 3% from the current 3.23% would cost about $400 million a year.
The size of the budget surplus is triggering the state’s automatic taxpayer refund law for the first time since 2012, with Holcomb asking legislators to modify the law so that about 900,000 people who don’t have enough income to owe any state taxes are also eligible for the $125 payments. If approved, that would result in payments by direct deposit or mailed checks to an estimated 4.3 million people by May 1.
House Republicans are also set to quickly advance a bill that would force businesses to grant broad exemptions to any COVID-19 vaccination requirements in response to conservative grievances over government-ordered virus precautions. The state’s major medical and business groups have opposed the proposal—and Holcomb has repeatedly said he believed employers should have the freedom to make such decisions themselves.
After conservative protests in some school districts over issues such as face mask requirements and teaching about racial injustice, Republican lawmakers are also pushing steps they say would increase transparency by mandating more parental access to classroom materials and adding political party identifications to what are now nonpartisan school board elections.
Holcomb, however, sidestepped taking any position Monday on such proposals.
“I’ll take a careful look at what their ideas are, and I’ll let you know as soon as I form an opinion on them,” Holcomb said.
Indiana Senate Minority Leader Greg Taylor, an Indianapolis Democrat, said he wished Holcomb and legislative Republicans would look at directing some of the state surplus toward actions such as further boosting school funding.
Taylor said he believed many Republican legislators were more worried about facing challengers in the May primaries for the GOP nominations than considering what is best for the state.
“They’re going to have some problems in primaries this year,” Taylor said. “They’re going to have to be almost off the right-side cliff to win a primary this year.”