The Indiana GOP is fighting among itself, and the outcome won’t determine whether Republicans are right or wrong on economics — it will strengthen, or damage, the moral case for fiscal conservatism. And the outcome will be determined by the end of the month.
The issue is who tax dollars belong to: the people or the government? And who should reap the rewards of good fiscal stewardship: the people or the government?
Because of the strong fiscal management of the Indiana GOP under former Gov. Mitch Daniels and a Republican legislature, the Hoosier State is in an enviable position in terms of liberty (they recently passed school choice laws as well as Right to Work) and in terms of their fiscal house (they have accumulated a half-billion dollar surplus and $2 billion in reserves). Having gotten their fiscal house in order, the question of what to do with that money — the moral question — is at the top of the list. Enter: The three players.
Newly elected Republican Gov. Mike Pence offered the first budget — one that cuts the Indiana personal income tax 10 percent (from 3.4 percent to 3.06 percent), spends $29.28 billion over two years, and doesn’t even touch the $2 billion in reserves. This cut-taxes approach was applauded by conservatives inside and outside the state, with fiscally conservative groups from the Indiana Americans for Prosperity (AFP) to the national Americans for Tax Reform speaking out in favor of it.
A little while later, the Republican supermajority in the Indiana House of Representatives passed their budget — one that doesn’t cut the state’s personal income tax at all, spends $29.95 billion over two years (hiking Pence’s budget by as much as $1 billion), and shortens the already-passed-10-year phaseout of the death tax to just four years. This use-prosperity-to-pay-for-more-government approach pleased no one except for the congressmen. In fact, it ticked AFP off so badly that they ran radio and television ads promoting Mr. Pence’s budget and causing a little stir in the normally quiet, conservative state.
A little while later, the Republican supermajority in the Indiana Senate took a step in the governor’s direction, offering a 2.9 percent income-tax cut (from 3.4 percent to 3.3 percent), calling for the immediate end of the death tax (hastening the 10-year phaseout), and proposing $29.5 billion in spending over the next two years. This compromise budget was greeted with cautious optimism, with Mr. Pence calling it “a good start” while maintaining calls for further restraint in spending and deeper cuts in taxes.
Next, the House and Senate will negotiate. They have until April 29 to present their shared budget to the governor.
While what excites us most is the Senate killing the death tax, the glory of the situation is that responsible conservative management of the state has given the GOP the ability to cut the income tax by 10 percent, eliminate the death tax, and buy a new highway — all while maintaining strong reserves. So while Democrats around the country are wondering how to avoid a fiscal doomsday of their own creation, the question for the Hoosiers is: Who does their surplus of tax money belong to, and what is the moral thing to do with it?
Long story short, the two branches of Indiana’s government are engaged in a turf war. There’s a new governor in town, back from a dozen years in Washington, and he’s coming up against a speaker of the House and a Senate majority leader who both have complete dominion over their own houses. But none of those two should forget that the surplus of money they are so happy to have belongs to the men and women of the Hoosier state who clock in every morning, working for days, hours and lifetimes to build their fortunes, care for their families, send their kids to college and retire comfortably. And not only does it belong to those people before government, it is better spent by those people before government.
The Hoosier legislature has done a good job in the people’s house, with the people’s money. But they should not forget that it is, indeed, the people’s house, and it is, indeed, their money.
So here’s a polite suggestion: Cut income taxes now; eliminate the death tax now; restrain spending now. End of session.