Chase Downham: Indiana's economy needs Mike Pence's tax cut
Indiana is at a crossroads. With strong reserves and a healthy operational surplus, the state’s biennium budget presents two distinct choices for Hoosier families. We can continue down the path of lower taxes and limited government policies as displayed in Gov. Mike Pence’s 10 percent income tax cut, or we can ignore what has made Indiana strong over the last several years and grow government spending.
No one can ignore what our legislative leaders and others have accomplished these past few years.
In 2010, Indiana was forecasted to run a $1.7 billion budget deficit. Rather than raising taxes to try to close the gap, Gov. Mitch Daniels responded by cutting the size of government by 2 percent. Recent hysteria over sequester cuts in Washington, D.C. would lead you to believe that such “draconian austerity” would be catastrophic to the economy. Actually, after cutting 2 percent of the budget, Indiana experienced 6.7 percent GDP growth (more than double the national growth rate), according to St. Louis Federal Reserve data, and a $500 million budget surplus. Other small government, pro-growth policies like giving tax refunds during surplus years, beginning the phase out of the inheritance tax, and passing right-to-work legislation have attracted new businesses to come into our state and have contributed to our astonishing growth rate.
If we want to continue attracting people and businesses to our state, we need to permanently lower the income tax. Our tax rate is, after all, one of the few factors we can change in our state. We will always have great farmland, friendly people, and be the best state for college basketball. But we must remain competitive if we want to stay one of the best states to raise a family and grow a business.
Gov. Pence’s proposed 10 percent tax cut is often discussed in terms of its effect on the state government budget. What really matters is the positive effect on the average Hoosier’s family budget. Lowering the rate as he has proposed will save real money for real people trying to make ends meet. Furthermore, permanently lowering the rate signals to them that our legislature is moving the opposite direction from many of our neighboring states. While Illinois and Michigan have bloated budgets and, unfortunately, appear unwilling to stop the spending, Indiana can show the way forward and welcome more “Hoosiers by choice.”
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