Goshen News, Goshen, IN

April 5, 2013

GOP can't get together on budget proposals


— As usual in the General Assembly, there are three different budget plans.

Senate Republicans unveiled their $29.5 billion budget Thursday and it was noticeably different than the budget proposed by Republican Gov. Mike Pence and the House Republicans’ version.

Usually the bi-annual budget crisis is created by a tiff between Republicans and Democrats in the Legislature. But as Republicans have heavy majorities in each chamber and control the governorship, it would seem to be an easy task for party officials to get on the same page when it comes to the budget. But that hasn’t happened.

The Senate’s budget proposal calls for a 3 percent cut in the income tax. An income tax reduction was rejected in the House version. And, Gov. Pence wants an even larger income tax cut of 10 percent.

We have yet to see how an income tax cut can help provide basic services to Hoosiers. We know nobody wants to pay more income taxes, but that’s not the proposal. The proposal is to trim current tax revenue.

The Senate Republicans are seeking to do that by reducing the tax on financial institutions by 2 percent, speeding up the inheritance tax phase-out, making it retroactive to Jan. 1, 2012, and reducing the corporate income tax to 6.5 percent from 8.5 percent. The plan also calls for spending $331 million more on education, just a little more than the $300 million cut from the education budget by former Gov. Mitch Daniels. And local road funding would be increased by $101 million.

The Senate plan reduces state tax revenues by $500 million a year. That’s about the same amount in the state surplus funds. The state also has $2 billion in cash reserves.

While the cash reserve and surplus seem adequate today, future obligations are ahead. The Senate budget calls for putting $100 million into the state teachers pension fund to whittle down the deficit. According to the Associated Press, that line item could cost the state up to $1 billion a year in a few years as older teachers retire. That’s one obligation that should be addressed now, instead of later.

When we look at all these budget proposals we conclude that legislators should use caution in cutting tax revenues. To say that income taxes need to be reduced is a popular thing to do, but ensuring the state’s fiscal stability in the coming years is the right thing to do.