Senate Appropriations Chairman Luke Kenley, R-Noblesville, said Tuesday that he’s not sure a new revenue forecast means lawmakers will have enough cash to approve Gov. Mike Pence’s tax cut proposal.
Photo by Lesley Weidenbener, TheStatehouseFile.com
By Samm Quinn
Gov. Mike Pence made yet another pitch for his income tax cut Tuesday, saying new revenue projections show the state can afford it, even with increases in spending on roads and schools.
But legislative fiscal leaders are skeptical and said the new money won't be enough to give Pence the full 10 percent cut in the tax rate that he's seeking.
John Ketzenberger, president of the Indiana Fiscal Policy Institute, said after the forecast that lawmakers can't implement Pence's full income tax cut plan without reordering their priorities, which he doesn't think the General Assembly is ready to do.
"If they decide to do the whole 10 percent it would probably not allow them to do many other kinds of things," he said. "It would really mean that education funding is going to be flatter, road funding is going to be flatter."
The bipartisan State Budget Committee learned the state could receive $289 million more from sales, income and other taxes during the next 27 months than what lawmakers thought when they started working on the next two-year budget back in January.
Pence said that's a good thing for Hoosiers because the state can afford his income tax cut, which will cost $520 million a year when fully implemented.
The House and Senate have both included some tax cuts for Hoosiers in their spending plans, but neither included the governor's entire program. And both chambers have identified other priorities that lawmakers want funded - including more for education and infrastructure than Pence put in his budget proposal.
Rep. Tim Brown, the Republican chairman of the budget-writing House Ways & Means Committee, said lawmakers have created what he called a "framework" for $500 million in tax relief. But he said they haven't settled on how that should be divided among a number of proposals, including plans to accelerate an phase-out of the inheritance tax and cut a banking tax.
"Our priorities are still looking at giving monies back to Hoosiers, fiscal integrity, education and road funding," he said. "So yes, this very much makes it an issue where we'll have lots of healthy discussion."
And to reach that $500 million in tax cuts, some lawmakers are counting a corporate tax cut that's already been passed into law.
At a meeting on Tuesday, fiscal leaders from the House and Senate will start meeting to try to find a compromise between their differing versions of the spending plan. The forecast sets the base for those talks.
The estimates increased revenue for the current fiscal year - which ends on June 30 - by $33 million. That's a 0.2 percentage point increase from December.
For the next two years, the forecast said the state should take in nearly $30 billion. That's an increase of $256 million over the two years or 0.5 percentage points more in 2014 and 1.2 percentage points more in 2015.
That money won't fully fund Pence's 10 percent income tax cut, and Senate Appropriations Chair Luke Kenley said lawmakers would have to cut back on other tax cuts and priorities to make it happen.
"I think if you do that you may have to consider backing up on the other tax cuts," he said. "We have a package of tax cuts on the table and I think we're maybe more into a negotiation about which ones you can do."
But Pence said he thinks these new numbers support his tax cut, which he's been urging lawmakers to include in the budget since he took office.
"I believe this provides the kind of resources that make us more confident than ever that we can pass a balanced budget that funds our priorities including increased funding for roads and schools and provides Hoosiers with the kind of tax relief that they need and deserve," he said.
And Pence appears to be willing to accept the inheritance tax elimination as part of a larger tax-cutting plan.
"Today's revenue forecast I think is great news for Hoosiers and its good news for policy makers at the Statehouse," Pence said.
Samm Quinn is a reporter for TheStatehouseFile.com, a news service powered by Franklin College journalism students and faculty.