Politics & Policy

Governor Pence’s Indiana-Tax Win

(Indianapolis Star photo)
He persuades reluctant lawmakers to cut taxes — does he have out-of-state ambitions?

As Indiana governor, Mike Pence has been flying under the radar. While other Republican governors, such as Bobby Jindal and Scott Walker, have taken advantage of their platform to speak out nationally, Pence has stuck close to his state and focused on the concerns of Hoosiers. Pence — who attracted buzz as a potential 2012 contender when he was still a congressman in 2011 — has instead been working diligently to rack up accomplishments during his first term as governor.

Pence’s top accomplishment this session was cutting Indiana taxes. Initially, he had proposed slashing the income-tax rate, currently at 3.4 percent, by 10 percent. Well aware of the burden put on citizens by the federal tax hike on January 1 and by the looming costs of Obamacare, Pence was determined to do what he could to ease the pain for Hoosiers. “He felt pretty strongly that what he could do as governor was to reduce the price of living and working in our state,” explains Ryan Streeter, a top Pence adviser.

#ad#Legislators balked at a cut this large. “While we appreciated the governor’s proposal to cut our income tax, our income tax is rated the best and lowest in the nation among the 41 states that have an income tax,” says Indiana House speaker Brian Bosma, a Republican, referring to the Tax Foundation’s ratings. Bosma was concerned less about the income tax than Indiana’s death tax, which was rated number 43 (or the seventh highest) in the country by the Tax Foundation.

Bosma speculates that Pence’s original proposal differed from the legislators’ goals because Pence lacked familiarity with the state legislature and its policy goals. “In Governor Pence’s defense,” Bosma remarks, “he and his team have not had the decades of experience with our state tax system and the well-thought-out reduction-and-cut plan that we had implemented” in recent years.

Ultimately, Indiana lawmakers axed the death tax completely and cut the income tax by 5 percent (rather than the 10 percent Pence wanted), reducing the rate to 3.3 percent in 2015, then to 3.23 percent in 2017. “What we ended up doing was putting together a collective tax package that results in the largest tax cut in our state’s history, about $1.1 billion dollars” over the next four years, Bosma notes.

Indiana Republicans argue that the final agreement was a win for Pence even though it wasn’t his original goal. Josh Gillespie, founder of the political blog Hoosier Access, says the final deal went beyond the legislature’s initial offers. “The original budget that House Republicans passed contained no tax cut whatsoever, and the budget that the Senate Republicans passed contained a 3 percent tax cut,” he says.

Streeter says the governor is happy with what he’s achieved — namely, the tax cuts and a new budget that “has annual spending growth of about 2.5 percent, when the average [spending growth] over the last eight years was about 2.8 percent.” Government spending in the state is still in the range of “low growth,” Streeter observes.

Despite the slowed government spending, education and infrastructure outlays have increased, as the Pence team is happy to point out. “There’s the tax relief and there are the surpluses, which are great because they keep our fiscal position strong,” Streeter says, but at the same time, the administration has demonstrated “a strong commitment to schools and infrastructure.”

Pence has clearly had a strong start, but he has the tough task of following in the footsteps of the much-acclaimed Mitch Daniels. “There will be a lot of unfair comparisons to Mitch,” Gillespie acknowledges. “Mitch set the bar very high, and you have to look where Governor Pence is coming in. When Mitch Daniels took over, the state was far into debt and had been under Democratic control for 16 years.”

Now that the legislative session is over, whether Pence will opt for the national spotlight remains an open question. “He’s rightly kept his eye on the ball here and the work before him,” says Eric Holcomb, chairman of the Indiana GOP. “He’s got a lot that he could share about the Indiana story. . . . I think you’ll continue to see him focused on Indiana, and we’ll see how that could be applied outside the border.”

“There will always be talk of presidential aspirations,” says Gillespie. “But . . . Indiana is where his heart is and where his focus is right now and at least for the foreseeable future.” If Pence is considering 2016, though, it’s anyone’s guess how long his sights will remain solely on Indiana.

— Katrina Trinko is an NRO reporter.

Katrina Trinko — Katrina Trinko is a political reporter for National Review. Trinko is also a member of USA TODAY’S Board of Contributors, and her work has been published in various media outlets ...

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