Saturday, October 25, 2014
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Howey: For Indiana Republicans, it’s tax cut showtime!

I hope they’re right, but I’m skeptical given the track record. Perhaps next session they’ll focus on the middle class.


Posted on March 20, 2014 at 12:17 p.m.

GNAW BONE, Ind. — I had this really crazy idea: Instead of giving tax abatements to businesses and industry, give them to Hoosier folks who want to build a new home or remodel the one they're in, particularly with the historic low interest rates that may begin disappearing soon.

The logic here was that for every new home built, there would be dozens of contractors and their workers on each job, and they would be buying brick, granite counter tops, dishwashers and garage door openers. You know, consumer stuff down at Lowe's.

I brought this idea up to Gov. Mike Pence and he politely thanked me and said he would move it down his administration's food chain. And that was that.

I couldn't help but think of Russ Stilwell's observation in a Howey Politics Indiana column he wrote. The former Indiana House Democrat had asked a southwestern Indiana business executive if the corporate tax cuts Indiana Republicans are addicted to really create jobs. The answer was sobering. They don't create jobs, he said. They create bigger bonuses for executives and returns to shareholders. The only way to create jobs is to make things that people want to buy.

So it was fun to watch Pence and legislative Republican leaders pat themselves on the back last week when the Indiana General Assembly concluded. While most of the fiscal focus during the session was on a repeal of the business personal property tax, that was shunted off to a blue ribbon study committee. Individual counties will have the option of repealing it and there is a new "super abatement" available for municipalities to attract big firms from other states. And there would be a corporate tax cut from 6.5 to 4.9 percent. Senate President David Long called this the "linchpin" of the legislation.

House Republicans released a fascinating chart detailing the various tax cuts over the past 20 years. If you're in the middle class, this tax cut series began with a 50 percent auto excise reduction in 1995, property tax cuts in 1996, 1997, 2002, 2006 and the Mother of All Property Tax Cuts in 2008. Some of the earlier property tax cuts in this sequence were overrun by other forces over the years. There was the 5 percent income tax cut last year that put about $50 a year into the pocket of the common Hoosier (I spent mine on a really cool bird feeder), and the automatic taxpayer refund act of 2011.

But then you look at the business tax cuts that have created what House Speaker Brian Bosma calls the "best business environment in the Midwest through policies that encourage and incentivize companies from all over the world to relocate and grow in Indiana."

Indeed, there was the corporate gross income tax repeal in 2002, the inventory tax phase out that began in 2004, the 2005 elimination of sales tax on research and development equipment, the 25 percent cut in corporate income tax in 2011, the death tax phase out of 2012, the accelerated death tax repeal in 2014 as well as the reduction of the financial institutions tax, and now set for 2015 the phase down of corporate income and financial institutions tax rates to 4.9 percent, or the lowest in the nation. If you want to get a crowd of middle-class Republicans cheering, tell 'em you've cut the death tax that really only helps the top 5 percent, with the replacement taxes spread out over the rest of us.

What do we have to show for all of these business tax cuts? This is where we get into alternative universe territory.

Indiana's jobless rate spent more than five years above 8 percent. It finally came down to 7.8 percent in September, 6.9 percent at the end of 2013 and 6.4 percent in January. But House Democratic Leader Scott Pelath noted that despite the .4 percent decline between December and January, there was actually a 9,705 decrease in the number of employed Hoosiers while 82 of Indiana's 92 counties saw jobless rates go up.

There are still 209,000 jobless people on the rolls. That doesn't include the tens of thousands more who are so discouraged they are no longer being counted. The amount of workforce participation in Indiana — with 38 percent of the population idle — is at a historic high, which belies Pence's slogan of Indiana being a "state that works."

Hoosiers ranked 39th in the nation in per-capita income in 2013, with residents making 87.2 percent of U.S. income $38,119, and 33rd in household income at $46,974, down from $47,399 in 2011 (32nd). In 2002, we ranked 24th at $53,482. That is a 13.6 percent decline in the last decade that coincides with all the business tax cuts. Indiana ranked 10th in bankruptcies in 2012, and sixth in the rate per 1,000 people.

If you listen to Pence, Bosma and Long, after a decade of GOP governors, the stage is set. Or as actor Roy Schneider would say in the 1979 classic movie "All That Jazz" . . . "It's showtime!"

I hope they’re right, but I’m skeptical given the track record. Perhaps next session they’ll focus on the middle class.

Howey, a former Elkhart Truth reporter, publishes at www.howeypolitics.com. Find him on Twitter @hwypol.

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