Strange as it might sound, Indiana’s current budget debate — focused largely on whether Gov. Mike Pence will get the small individual income tax cut he has proposed — has a lot to do with John Gregg.
The ultimately failed Democratic candidate for the job Pence got stood outside an Indianapolis gas station last summer and proposed suspending Indiana’s sales tax collections on gasoline purchases.
The proposal would have cost the state about $500 million per year. It was a populist idea, but unrealistic, since Gregg also wanted to beef up Indiana’s funding for education and health care while also launching a prekindergarten pilot program.
Still, it wasn’t long before the Pence campaign hit back. The Republican proposed a similar-sized tax cut, also worth a little more than $500 million per year total. He’d reach that total a different way: by lowering the state’s income tax rate from 3.4 percent to 3.06 percent — or, as the public-relations pitch goes, by 10 percent.
The income tax cut became the central plank of Pence’s campaign. And once he was elected, the new governor who is still working to overcome criticism that he failed to shepherd any bills he introduced into law during his 12 years in the U.S. House, knew he had to stick with it. He highlighted the tax cut in his inaugural address and his first State of the State speech.
That the governor has so much riding on the tax cut helps explain his dramatically different reactions to a budget approved by the House earlier this year and one the Senate unveiled last week.
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Though Pence’s full tax cut would save average Hoosiers less than $5 a paycheck, surely the most significant impacts of Indiana’s next two-year state budget, which will be worth $30 billion or so, will be in the areas of public education and health care.
But Pence staked so much on an income-tax cut — one with roots in the back-and-forth of last summer’s campaign — that it is how his clout will be measured once the legislative session wraps up by April 29. For better or worse, that’s why the governor is pouring all of his political capital into that one proposal.
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