From the Fort Wayne Journal-Gazette:
The majority of benefits from an income tax cut proposed by Republican gubernatorial candidate Mike Pence would flow to the highest-income Indiana taxpayers, a new analysis shows.
Pence, a six-term U.S. congressman, last week proposed dropping Indiana’s 3.4 percent income tax rate to 3.06 percent. He called it an “across the board” cut that would save an average family of four about $228 a year.
The Institute on Taxation and Economic Policy used its microsimulation tax model to analyze the plan.
ITEP is a non-profit, non-partisan research organization based in Washington, D.C., that works on federal, state and local tax policy. The organization’s focus is tax fairness and sustainability.
According to the ITEP report, if Pence’s rate cut had been in effect last year, a typical middle-income Indiana resident would have seen their taxes fall by about $102, while the state’s richest 1 percent of taxpayers would have received an average tax cut of $2,264.
In total, more than half the benefits of the rate cut would flow to the best-off 20 percent of Indiana residents.
Overall, about 12 percent of Hoosiers would see no benefit from cutting Indiana’s income tax rate, the report said. Most of this group consists of low-income taxpayers who are too poor to owe state income taxes but who pay significant amounts in sales taxes, excise taxes, property taxes, and other state and local taxes and fees.
Christy Denault, communications director for the Pence campaign, said his proposed tax cut is pro-taxpayer and pro-business.
“It is designed to put more money into the hands of taxpaying Hoosiers, including the 92 percent of businesses that pay the state through the individual income tax. Mike’s plan increases take-home pay for Hoosiers and provides permanent relief for our small businesses.”
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http://www.journalgazette.net/article/20120808/NEWS07/308089972/0/SEARCH
The counterpoint is found in the Fort Wayne News-Sentinel:
The Institute on Taxation and Economic Policy calls itself a “nonprofit, nonpartisan research organization.” But since its self-described mission “focuses particularly on issues of tax fairness and sustainability,” make that liberal nonpartisan research organization. Those obsessed with public policy fairness think the correct government approach can level any playing field.
ITEP’s latest target is GOP gubernatorial candidate Mike Pence’s proposal to cut Indiana’s 3.4 percent income tax rate to 3.06 percent. The organization thinks such across-the-board cuts are unfair because most of the benefits go to the most-well-off 20 percent of Hoosiers. If the cut had been in effect in 2011, the average Hoosier would have saved $102 in taxes, but the richest 1 percent would have realized $2,264 in savings.
The richest benefit the most, and the poor get screwed again! Yes, that’s one way to look at it.
But there is another way. Indiana has a flat income tax rate – everybody pays 3.4 percent regardless of the amount earned, which means the more money people make, the more they pay in taxes. So an across-the-board cut to a lower flat rate means everyone saves the same percentage, which naturally means those who earn the most save the most. With or without the cut, those who make the most pay the most in taxes. Doesn’t sound quite so unfair when it’s put that way, does it?
ITEP and others who want more tax fairness hate all “regressive” taxes – those that require low- and moderate-income taxpayers to devote a larger share of income to paying taxes than upper-income taxpayers. Hated equally are all flat-rates taxes, such as property tax, sales tax and excise taxes. “A personal income tax,” ITEP says in one of its policy papers, “is simply the only major revenue source available to states that can meaningfully mitigate the unfairness of sales, excise and property taxes.”
So all ITEP is really saying is that it hates a tax that is flat rather than “progressive” (taking a higher percentage from those who earn more), and it won’t hate it any less just because it goes down.
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http://www.news-sentinel.com/apps/pbcs.dll/article?AID=/20120809/EDITORIAL/120809662/0/SEARCH
