Need to Know: The Pence and House Budgets
- Government Spending
As initially reported by multiple news outlets, the House budget spends roughly $1 billion more than Governor Pence’s budget proposal.
“The GOP plan tops Gov. Mike Pence’s budget by more than $1 billion,” WTHR (NBC Affiliate), 2/19/2013
General fund appropriations in the Governor’s budget total $29.280 billion. The House budget total is $29.995 billion. The difference being an additional $715 million dollars in government spending in the House passed budget. Coupled with the additional $300 million going to education reserves and other expenditures, this difference is certainly in the $1 billion range. People can disagree if these increases are appropriate, but the numbers are the numbers. Money not being returned to taxpayers is money spent.
This is a choice to grow the economy or grow government spending. Which would you choose?
- Automatic Taxpayer Refund
Several leading political reporters in the state claimed that the House budget would not trigger the automatic taxpayer refund.
“The 2 year $29 billion [House budget] spending plan does not include the income tax cut sought by GOP Gov. Mike Pence. It also does not trigger the automatic taxpayer’s refunds that were included in the governor’s budget,” Jim Shella, WISH-TV, 2/15/2013. This Article also ran in the Indiana On Politix, 2/15/2013.
The House has now made it clear that their budget does maintain a taxpayer refund. We are happy to hear to it, but let’s look at the two taxpayer refunds present in both budget proposals.
The House now claims a taxpayer refund at the end of FY15 of $51 million. This amounts to roughly $15.64 per taxpayer once split among the 3.26 million Hoosiers who are currently eligible for an automatic taxpayer refund.
The Governor’s budget projects a taxpayer refund at the end of FY15 in the amount of $234 million. That amounts to roughly $71.74 per eligible Hoosier taxpayer.
Which would you choose?
- Tax Relief
As you know, the Governor’s budget proposal includes a 10% income tax cut for all Hoosier taxpayers and small businesses. This tax cut amounts to roughly $772 million going back into the pockets of Hoosier taxpayers over the next two years.
The House budget proposal features an acceleration of the inheritance tax phase out. Currently scheduled to be eliminated in the next nine years, this acceleration would eliminate the tax by 2018 saving taxpayers a total of $271 million when compared to current law.
It should be noted that AFP applauded the efforts by the General Assembly to initiate the phase out of this burdensome tax in 2012, and we certainly believe the sooner it goes the better. However, if asked to compare the two tax cuts, one needs to look at their long term effect as well as the short term.
First, the Governor’s tax cut is new. The inheritance tax phase out will already occur. Accelerating the inheritance tax elimination is great, but this tax is already scheduled to go away within the next decade. Indiana taxpayers deserve additional tax cuts; not just the acceleration of previous promises.
Long term, the 10% income tax cut is nearly $500 million greater in just its first two years than the total effect of the acceleration of the inheritance tax phase out. Every year after, the income tax cut will put this amount back into the economy, allowing all Hoosier taxpayers to keep more of their hard-earned money.
In the short term, the 10% income tax cut puts $772 million back into our economy, while the accelerated inheritance tax phase out is slow to start and is projected to give just $7 million dollars additional back to taxpayers within the next two years. Accelerating the inheritance tax elimination is great, but the vast majority of these savings will not be realized until future budgets.
Over the next two years, the Governor’s tax cut proposal is 100 times greater than the House’s.
Which would you choose?
- A Balanced Approach
Contrary to some of the claims of critics, the Governor’s budget proposal is not an “either/or” proposition. It actually prioritizes spending in areas deemed important while also providing taxpayers a substantial tax cut and maintaining our emergency funds.
Given our fiscal situation with strong reserves and an operational surplus, Hoosiers taxpayers deserve to keep more of their money.