Did you know Indiana corporations, financial institutions and individuals are scheduled for another tax cut? Perhaps you have forgotten, that three years ago, Governor Pence proposed a tax reduction for all three taxes. Although budget watchdogs in the legislature balked, rightfully deeming it unaffordable, Republicans in the legislature nevertheless forged ahead, enacting phased-in tax cuts.
It works like this. Individual income tax rates are scheduled to decrease from 3.40 percent in 2013 to 3.23 percent in 2017. It creates a reduction of more than two percent of state income tax revenue annually, according to the Legislative Services Agency.
The situation is similar for the corporate income tax and the Financial Institutions Tax (FIT), taxes paid by big banks. The rates started at 8.5 percent in 2013 and are scheduled to phase down to 4.9 percent by 2021. That's a 42 percent decrease.
Taken together, the future rate reductions for just these three taxes equal a budget hole of more than $2.27 billion over the next eight years.
Complicated? Consider this simple analogy: Drill a hole in Indiana's revenue bucket. Each year, drill another new hole. Including the elimination of the inheritance tax, the total cost of these cuts from the time of enactment, until full phase-in in 2023 exceeds $6 billion.
The political capital that may have been garnered when the tax cuts were enacted in 2013 has long been spent. Governor Pence, it appears, is no longer in the game for a presidential run. Our corporate tax rate is the 14th lowest in the country, and only Pennsylvania has a lower individual income tax rate.
The average citizen has likely forgotten that it even exists. And you can't blame them considering the savings to an individual taxpayer making $50,000 a year comes out to less than a dollar a week. It's money they'd probably prefer be spent to fix and maintain our roads and bridges.
So I offer a simple solution that will go a long way toward meeting our road funding needs: a moratorium on any additional decreases in our corporate, FIT and individual income tax rates. Let's start in 2017. It is not a tax hike; the rates would be kept at their current, low levels. Those legislators who committed years ago to a "no new taxes" plan can rest assured their promise won't be besmirched. It won't plug the revenue holes we've already sustained. But we can put away the drill for now and fund our roads.
State Senator Karen Tallian (D-Portage) is the highest ranking Senate Democratic member of the State Budget Committee and ranking minority member of the Senate Committee on Appropriations.