News From Terre Haute, Indiana

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May 2, 2013

GUEST EDITORIAL: Tax cut a victory for Pence, but will it actually help Hoosiers?

BLOOMINGTON — So, are you excited Gov. Mike Pence and the Indiana General Assembly has passed a 5 percent cut in your state income tax? Good for you if you are.

But don’t spend it all in one place.

Its legislative supporters hope this political morsel will be gobbled up by Hoosier voters.

“Hey, they cut our taxes!”

And indeed they did. Let’s do the math.

Indiana’s current income tax rate of 3.4 percent will be cut to 3.3 percent in 2015 and then to 3.23 percent in 2017. The tax burden on Hoosiers this year would be $340 on each $10,000 of taxable income. In 2015, that will drop to $330 (a cut of $10-per-$10,000). Finally, in 2017, it will settle at $323 ($17-per-$10,000).

For those with a family income of, say, $50,000, the savings two years from now will be $50, or 96 cents a week. The more well off who make $150,000 will save $150, or $2.88 a week.

The complete impact would come two years later, when the same $50,000 family income would be cut by $87 and the $150,000 family would retain $255 in lower taxes.

The impact for the first family will be $1.67 a week (about the same as a “tall” coffee at Starbucks, which is that company’s name for a small), and for the other family $4.90 a week (two cups of coffee, or a coffee and a muffin).

For those who like averages, the “average” Hoosier would realize $114 in annual tax savings, or $2.19 a week.

It’s a symbolic gesture, meant to show the governor and lawmakers are on Hoosiers’ side by throwing them a few bucks that could have totaled something of significance if channeled to programs designed to improve education, help senior citizens or shore up the safety net for people living in poverty.

“Today Hoosier taxpayers won a great victory. The agreement reached between our administration and legislative leaders will be the largest state tax cut in Indiana history,” Pence said after legislators agreed on this action.

It’s a political victory for Pence, one even the Republican-dominated Legislature found difficult to stomach. The governor wanted a 10 percent tax cut (twice as symbolic?) but legislative leaders from his own party thought for a long while it would be better to continue to capture the $520 million in tax money for the state budget. The agreement cut that amount in half.

The governor deserves an A for effort and persistence. He campaigned on cutting income taxes, and he kept his promise.

He’s maintained it can be done without harming any programs operated by state government.

Now we’ll find out, with the means to grab an extra coffee or soft drink a week.

— The Herald-Times,

Bloomington

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