INDIANAPOLIS — It’s been clear for months that Republican Gov. Mike Pence and the GOP majorities in the General Assembly are at odds over the governor’s plan to cut individual income tax rates by 10 percent.
But it was still a surprise when Pence reacted to the GOP House budget, a plan that doesn’t include the tax cut, by saying that “Hoosiers deserve better.” And now the GOP governor is essentially on the same side as Democrats in the House, who say they’ll force the Republicans to vote on the tax cut.
It’s the first real spark in a session that’s been mostly about cooperation — between the parties and seemingly with the governor’s office, too.
House Speaker Brian Bosma, R-Indianapolis, and Minority Leader Scott Pelath, D-Michigan City, have joined forces on a workforce bill. And the House Republicans and governor are on the same page on an expansion of vouchers and a new preschool program.
Even state Superintendent Glenda Ritz, a Democrat elected last fall, has been surprisingly quiet about GOP moves to strip authority away from her office.
But on Friday, you could barely tell the governor and GOP leaders are members of the same party.
“I am very disappointed in the House budget proposal,” Pence said in a statement. “Despite having the largest budget surplus in history, this House budget increases spending without giving hardworking Hoosiers one cent of new tax relief.”
And later in his statement, Pence said that “Indiana recently cut taxes for businesses and estates. It’s time for average Hoosiers to get a break.”
What’s fascinating is the GOP House proposal has actually brought Pence and Pelath together, at least for now. Pelath said Friday that Democrats will ensure there’s a vote on the Pence tax cut, which would take about $520 million out of the annual revenue stream once fully implemented. And he said there will be Democrats who vote for it.
They’ll do that through amendments, and it will be pretty tough for Republicans to stop them, although it won’t be a surprise if they try. After all, that will force Republican lawmakers to vote on the tax cut, which could be a no-win situation.
If they vote yes, it throws their budget into a deficit. If they vote no, they’ve given the Democrats a ready-made campaign commercial.
Of course, the issue is about policy, not just politics.
Pence argues the income tax cut would put more money in the pockets of small-business owners, who pay taxes on their businesses through the individual rate, and boost economic investment.
Pelath said it’s the governor’s one bold idea, and at least it will do something to help people in the middle class.
GOP legislative leaders counter that after several years of tight budgets, the state needs to spend some money on schools and other programs, in part to catch them up from some lean times. And their $30 billion, two-year budget plan, which was to be formally presented in the Ways and Means Committee on Monday, reflects that.
It spends more on schools, roads and universities. It eliminates the inheritance tax, which is being phased out under current law. And it puts $300 million over two years into a reserve fund for schools.
The latter is important because the budget proposal also changes a formula used to generate automatic taxpayer refunds when the state has a big surplus. The GOP House plan removes that school savings account from the calculation.
The result is that the taxpayer refund wouldn’t be triggered under their plan, as it would have been under Pence’s proposal. So that’s two income tax cuts proposed by Pence that aren’t included in the House Republican budget.
Soon we’ll learn whether Republicans have the backbone to continue saying no to both, and the outcome could impact the relationship between Pence and lawmakers for years to come.
Lesley Weidenbener is managing editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.