As Gov. Mike Pence and House Speaker Brian Bosma ramp up their respective campaigns for and against a state income tax cut, Hoosiers should know that the issue is as much about maintaining state highways and local streets as it is about a minor tax cut.
While a 10 percent tax cut may sound good, Pence has not made the case that a tax cut of little more than $3 a week for a typical Hoosier is more important than giving local governments a more reliable income stream to keep up roads and streets.
The governor spoke Tuesday at the Statehouse to members of the Indiana Association of Cities and Towns. They are mayors and council members who express concerns that reductions in gasoline excise tax revenue and state controls on property taxes have limited their capacity to adequately maintain local roads and streets.
While a minuscule tax cut might have a minuscule effect on the economy, cities with poor streets do not draw development.
The House budget plan would increase financing for local streets and state highways by $250 million. A Pence tax cut would reduce state revenue by $750 million. It doesn’t seem likely both can occur.
Pence says he prefers beefing up money for local roads and state highways by tapping into the state’s surplus – which would be, at best, a one-time measure. Bosma and other Republican legislative leaders prefer a plan that redirects the portion of gasoline excise tax revenue that now funds state agencies back to roads. A portion of the separate sales tax on gasoline would also go to roads. Using those two gasoline taxes is more of a long-range approach than Pence’s one-time proposal and would allow state transportation officials, county commissioners, mayors and town boards to better plan for road maintenance.
In a letter to Republican county chairs last month, Bosma cautioned against the tax cut. The most important job of state government, he wrote, is to be lean, efficient, and most importantly, sustainable in the long run, avoiding wild shifts in one direction or another.
Bosma and other legislative leaders understand the danger of relying on state surpluses for fundamental, ongoing needs such as highway maintenance. In 1998, as Bosma notes, a $2 billion surplus gave state officials confidence to cut taxes – and within a few years, they were facing a $1.3 billion deficit.
Americans for Prosperity, a group funded by the conservative Koch brothers, is lobbying heavily for a tax cut, though Republican Sen. Luke Kenley, R-Noblesville, questions how much that group knows about Indiana’s finances.
Pence has never really explained why a 10 percent cut is appropriate. Legislative leaders have never embraced the idea, which the governor first pushed during his campaign last fall. And tax-cut skeptics such as Bosma, Kenley and Senate President Pro Tem David Long, R-Fort Wayne, are not trying to gain a partisan advantage – they, like Pence, are all Republicans. They were there when the General Assembly cut education funding and allowed road funding to slide in order to balance the budget and achieve the surplus.
Those leaders understand the need to take care of the state’s highways and roads, as well as restore some of the education funding, while Pence’s tax cut would be barely noticeable to most working Hoosiers.