As governor of Indiana, he has cut taxes and regulations, yielding impressive job growth, especially in manufacturing.
If you fix it, they will build.
“It” refers to the government’s policy toward manufacturing. Since 2000, the United States has lost about 5 million manufacturing jobs. Too often, the federal government punishes manufacturers through burdensome regulations, perverse tax policies, and a variety of laws that make it cheaper and easier for companies to relocate elsewhere. Manufacturing has become a critical issue in the battleground states of the industrial Midwest, which is one reason why Donald Trump tapped Mike Pence as his running mate.
As governor of Indiana, Mike Pence made great strides in revitalizing the state’s manufacturing sector. Pence simplified the tax code to treat manufacturers more fairly, stabilized the regulatory environment to provide cost certainty, and launched private-sector partnerships to improve the quality of the workforce.
These efforts have paid off. Since Pence became governor in 2013, Indiana’s labor force has increased by more than 186,000 jobs and its unemployment rate has fallen from more than 8 percent to less than 5 percent. Of those new jobs added, 29,600 are high-paying manufacturing jobs, which places Indiana fourth in the U.S. in the total number of manufacturing jobs created since 2013. Under Governor Pence, Indiana remains the most manufacturing-intensive state in the country.
Pence has shown that states can support manufacturing in constructive ways that are consistent with a belief in limited government and free-market economics. As part of the Trump-Pence ticket, Pence may well have the opportunity to extend some lessons from Indiana to the nation as a whole.
Reducing and simplifying taxes
Perhaps most important, Pence helped to lower the cost of doing business in Indiana. Indiana’s corporate income-tax rate is in the process of falling from 8.5 percent to 4.9 percent, which would give Indiana the third-lowest corporate-tax rate of any state levying the tax. Pence also gave localities the option to exempt certain businesses and property from the business personal-property tax, a change that the Tax Foundation deemed an “innovative policy solution” that could serve as a model for other states.
Pence reduced the overall regulatory burden by repealing about 40 percent of all tax regulations.
In addition, Pence simplified the tax code to help manufacturers. In 2014 he hosted a conference on “tax competitiveness and simplification” that identified numerous ways to streamline the tax code. For instance, Indiana repealed its outdated “throwback” rule for corporate income taxes, which unfairly forced manufacturers to pay taxes on income earned in other states. Indiana also allowed manufacturers to exempt more of their business activities from taxes, which helped to lower their costs and the costs of products for consumers. Finally, Pence reduced the overall regulatory burden by repealing about 40 percent of all tax regulations.
Stabilizing workers’-compensation costs
Beyond taxes, Pence stabilized the regulatory environment for manufacturers. In 2013, Pence signed ground-breaking legislation that imposed a fee schedule on hospitals for workers’-compensation treatment that, in the long-term, will reduce workers’-compensation costs attributable to hospital treatment. The law balanced the goal of reducing costs with the need to provide adequate benefits to help injured employees. Over the last four years, numerous businesses have relocated to Indiana from neighboring Illinois due in part to Indiana’s lower workers’-compensation costs.
Imposing budgetary discipline
Pence helped Hoosier employers decrease the amount they pay the federal government in premiums under the Federal Unemployment Tax Act (FUTA). In the fall of 2015, Pence repaid in full an unemployment-insurance trust-fund loan from the federal government ahead of schedule. In response to the Great Recession, former governor Mitch Daniels had taken out a federal loan to replenish the state’s rapidly depleting unemployment-insurance trust fund. As a result of the early pay-off, FUTA taxes fell to $42 per employee, instead of $168 per employee had the federal loan not been repaid. By paying off the federal loan early, Pence saved Hoosier businesses $327 million.
Improving education and workforce development
In his first legislative session in 2013, Pence created the Indiana Career Council to address the “skills gap” among many Hoosier employees. The council would match employees’ skills with employers’ needs by coordinating the various participants in the education, jobs-skills-development, and career-training systems. The Career Council set an ambitious goal that at least 60 percent of Indiana’s workforce must have the post-secondary knowledge, skills, and credentials demanded within Indiana’s economy by 2025.
In the same session, Pence created eleven Regional Works Councils throughout Indiana to enhance technical-training options that encourage all students to go to college, learn a trade, or start a career right out of high school. Each council consists of approximately 15 local education and workforce leaders from within the region. The councils create partnerships with businesses to enhance the career readiness of adults and high-school students by expanding opportunities for earning industry-recognized certifications, increasing dual-credits attainment, and aligning high-school and college curricula with regional workforce needs.
Through these and other policies, Pence has shown that government can help manufacturers compete in the global economy, and hire more employees, in the nation’s heartland. By reducing taxes, easing the regulatory burden, and aligning employees’ skills with the needs of the private sector, Pence has nurtured an environment conducive to job growth. This message and record may well resonate in the other states that will determine the outcome of the next election.
— Asheesh Agarwal served as Mike Pence’s legal-policy adviser during his campaign for governor in 2012. Tim Rushenberg was the vice president of an Indiana manufacturing trade association in 2013–14.