INDIANAPOLIS (AP) — Indiana House Republicans are forging ahead with their push for broad business and individual tax cuts even with ongoing skepticism from other GOP leaders in the Statehouse.
The Republican-dominated House is expected to vote next week on endorsing the proposal that would potentially cut more than $1 billion a year in various taxes and send it on to state Senate for action. The House Ways and Means Committee voted along party lines Wednesday to advance the plan after rejecting several changes Democrats argued would do more to help struggling families.
Republican leaders in the state Senate and GOP Gov. Eric Holcomb are hesitant to make large tax cuts now even after big jumps in state tax collections are projected to boost the state government budget surplus to a whopping $5.1 billion, or 29% of state spending, by the end of next June.
Ways and Means Committee Chairman Tim Brown of Crawfordsville said he was optimistic of winning Senate support for the tax cut plan.
“Just think, we have $5.1 billion in reserves, and that’s Hoosier money, that’s money paid by citizens,” Brown said.
Key parts of the House plan would cut Indiana’s current individual income tax rate of 3.23% over the next four years to 3.0%. That would ultimately reduce state tax collections by an estimated $500 million a year when fully implemented in 2026.
The plan also proposes cuts in several business taxes, potentially cutting those tax bills by between $700 million and $850 million a year.
Republicans turned aside proposals from Democrats to modify the bill with steps such as increasing the state’s tax deduction on rent from $3,000 to $5,000 a year, eliminate the sales tax on diapers and tampons and lower the current 18 cents-per-gallon gasoline tax to 15 cents.
“We’re looking at giving a billion dollars to corporations and we’re not doing anything for people who are the infrastructure of our state,” said Democratic Rep. Greg Porter of Indianapolis.
Democrats also sought to lower the state’s 7% sales tax rate, which is the second highest in the country, to 6.5%.
Brown said he supported such action but that other Republicans wanted to focus on lowering the individual income tax because nonresidents pay sales taxes.
“I had this debate with leadership all up and down this building and I lost,” Brown said.
Senate President Pro Tem Rodric Bray has been consistent in saying he believes action on tax cuts should wait until the 2023 session when lawmakers draft a new two-year state budget and will have more information about the economy’s direction after federal COVID-19 relief payments end.
“You’re trying to weigh all that revenue coming in and the opportunities that you might have to send that back to taxpayers and businesses against the idea that there are headwinds out there, least of which is inflation and supply chain challenges, workforce issues, things of that nature,” Bray said.
The House Republican plan would cut the property taxes charged on business equipment by nearly $400 million a year, according to legislative staff estimates. Utility company taxes would be cut an estimated $220 million annually, while broadening a sales tax exemption on business equipment purchases could cost between $85 million and $250 million a year.
Holcomb has proposed a reduction of property taxes on new business equipment purchases and shares the reluctance for major cuts now.
“I want to make sure that we have an accurate picture and that our fiscal radar is not artificially inflated,” Holcomb said.
Democratic Rep. Ed DeLaney of Indianapolis said he believed the tax cut caution was appropriate while chastising Republicans for not wanting to put more money toward needs such as pre-kindergarten programs and lowering college tuition.
“I don’t like the fact that we’re not investing now and the idea of preventing future legislatures from investing is really troublesome,” DeLaney said.