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Pence: Reduce income tax

INDIANAPOLIS – Gov. Mike Pence on Wednesday renewed his push to drop the state income tax, telling reporters that Ohio and other states are seeking larger tax cuts.

"We're not operating in a vacuum," he said. "There is stiff competition for investment and jobs."

Pence noted Nebraska and Louisiana have announced major income tax reform in the last two weeks and that Ohio Gov. John Kasich joined the fray Monday.

His package would reduce the tax rate on virtually all small businesses by 50 percent, cut the income tax rate statewide by 20 percent over three years, and lower the sales tax rate from 5.5 percent to 5 percent.

The cuts are covered in part by expanding the state sales tax to professional services such as lawyers, accountants and more.

Kasich's proposal would deliver $1.4 billion in tax cuts over three years.

Pence is asking for a 10 percent cut in the individual income tax rate, from 3.4 percent to 3.06 percent, over two years. It would cost the state about $500 million a year when fully implemented.

"We are in a competition. Indiana is in the poll position but other states are not standing still," he said.

Lawmakers have expressed concern that cutting the income tax further shifts the state's reliance to sales tax, which is one of the highest in the country.

Pence wouldn't address the sales tax imbalance, simply saying he believes lowering income taxes will create jobs.

"We are able to permanently lower the personal income tax rate without any other change in our revenue structure," he said.

And the governor argues his budget also still funds schools and roads.

Pence also said Wednesday that he does not support eliminating the automatic taxpayer refund put in by former Gov. Mitch Daniels. Some legislators have suggested that would be necessary to implement a permanent tax reduction.

The refund kicks in when Indiana reserves rise to certain target levels. This year taxpayers will receive $100 each or $222 for a married couple filing a joint return.