Note: This message is displayed if (1) your browser is not standards-compliant or (2) you have you disabled CSS. Read our Policies for more information.
|6333px X 4528 | 2mg||5502px X 4098px | 2mg|
April 17, 2013 - Governor Pence makes the case for a 10 percent cut in the income tax at Indy Chamber event (Length 25:31)
Remarks of Governor Mike Pence
As prepared for delivery
April 17, 2013
When I ran for Governor, I heard in every corner of our great state that the condition of our economy and the jobs it produces were Hoosiers’ primary concern. I have continued to hear the same thing since taking office in January.
Well, yesterday we received some good news. Our economic forecast showed that Indiana enjoys job growth at a rate faster than 42 other states.
In addition, the forecast showed that Hoosiers can expect job growth and falling unemployment over the next several years. We can expect our state’s overall economic output to grow as well. That’s great news for Hoosiers.
Our economic fundamentals look good. The revenue forecast shows that job growth is moving in the right direction.
This is welcome news for all Hoosiers. However, we also need to maintain some perspective.
Despite our positive trajectory our economy’s growth is not matching Hoosiers’ hopes and aspirations for greater opportunity. This feeling is not unfounded.
There’s plenty of room to grow.
Even though we have seen strong job growth since the depths of the recession, job growth is not as strong as we’d like. We need more high-wage, high-demand jobs in Indiana. Our per capita income stands at 86 percent of the national average. We continue to languish in the lower half of states when it comes to personal income.
When it comes to per capita GDP growth, we are pretty much in the middle of the pack nationally. Our state’s challenges are compounded by national trends. Just last week we learned that consumer spending is down across the board and has, in fact, been worse than we thought since the beginning of the year.
The reason I’m focusing on Indiana’s position compared to other states is because we are in a national and global competition for jobs.
States that understand the nature of the competition we are in are the states with the best economies. They also understand that a successful job creation strategy must be multi-faceted and based on the key factors that help you win in the competition.
That’s why I have made job creation job one since my first day in office. That’s why we proposed a bold agenda and a jobs budget that are faithful to this task. My budget responds to the realities of the competition we face from other states. More specifically, I have proposed:
Today, as I did last summer, I’d like to focus on tax reform and why I believe, in combination with these other initiatives; it will make Indiana more competitive and create jobs for Hoosiers. The discussion my tax proposal has started, I believe, has been good for the Hoosier state. It has added to the healthy debate we have been having about how tax policy affects growth in Indiana.
For instance, because of Speaker Bosma’s leadership and the bold action by Senators Long and Kenley, among others, that debate has led to a growing consensus to accelerate the phase-out of Indiana’s inheritance tax. I strongly support this measure as part of a final budget agreement. I welcome the day inheritance tax is phased out completely. Death should not be a taxable event.
Regarding my income tax proposal, much of the debate has centered on whether we can afford a 10 percent reduction in income taxes. As yesterday’s revenue forecast showed an additional $290 million in revenue over the next 27 months, it is clear that we can afford it.
The larger question is whether we can afford NOT to pursue a 10 percent reduction in our income tax.
Here’s why: the net effect of a reduction in income taxes—in today’s competitive national and global economy—is greater economic growth at home. That economic growth is felt not only in rising per capita GDP, but also in rising personal income. We need both in Indiana.
My proposed budget has shown that we can spur this kind of growth by reducing income taxes, while increasing funding for schools and funding our infrastructure needs.
Our fiscal situation is strong, and putting more dollars back into the hands of Hoosier taxpayers to boost local economies across the state should be our first priority.
Now, I know that skeptics of my proposal tend to focus on what they claim are meager effects on households’ budgets. They do so to the detriment of three larger points.
First, $500 million in the pockets of Hoosiers rather than the coffers of the state is no small number. Second, it’s not a matter of whether the money gets spent, but who spends it. I believe families and small businesses should get to spend those dollars how they choose and put those dollars back into the economy, not the government.
But today I want to highlight a third point that has received much less attention in the debate we have been having about taxes: Better income tax policy leads to a better economy. In a word, lower income taxes mean more jobs.
Simply put, lowering our income tax rate will put us in a stronger position in the competition for jobs and investment.
It is imperative that we understand our situation in Indiana against the backdrop of what is happening across the country.
To put our situation another way: We are squeezed on the one side by the increasing pressure taxes place on job creation, and on the other by states whose competitive tax environments are beating us in the jobs war. And again, Indiana must seize this moment to make our state more attractive to investment that creates jobs. Income tax relief is a critical component.
We need to confront this situation head-on, guided by the evidence rather than ideology. We need to admit that, despite all of our recent successes here in Indiana, we still have work to do if we want to be competitive.
So let’s take a look. For instance:
The point is this: If we want Indiana to be more competitive in today’s global jobs war, we have to care about the battle over income taxes. Lowering income taxes across the board by 10 percent will increase our GDP. It will increase personal income. It will bring new investment and more jobs.
Let me summarize what I’ve said with a quote from another academic article by Poulson and Kaplan:
Most states introduced an income tax and came to rely on the income tax as the primary source of revenue. Jurisdictions that imposed an income tax to generate a given level of revenue experienced lower rates of economic growth relative to jurisdictions that relied on alternative taxes to generate the same revenue.
And if that wasn’t enough, let me offer this, from a study by Brian Goff, Alex Lebedinsky, and Stephen Lile. They write:
Our results provide strong support for the idea that lower tax burdens tend to lead to higher levels of economic growth. Among tax variables, individual income taxes matter most.
Higher income taxes negatively affect growth, period. It’s hard to argue with the evidence.
A permanent 10 percent income tax reduction gives small- and medium-sized businesses the predictability they need as they plan to grow over the long haul. The value in my tax proposal can’t be calculated simply by looking at how much an average household will save next year, but by looking at the overall impact on Indiana’s economy over the next decade and beyond.
The greatest benefit is long-term predictability for small businesses that will give them the confidence to expand, purchase equipment and hire Hoosiers.
Every week I make job creation job one. Since my first day in office we’ve met weekly with our economic development team. We’ve had great jobs announcements with Amazon, Chrysler, Dow AgroSciences, Geico and other. When I call CEOs of companies across America and in other countries in an effort to persuade them to come to Indiana, they consistently tell me that our AAA rating and the fiscal discipline on which it rests are absolutely essential in their considerations.
Our fiscal stability is another important source of predictability for private enterprise.
Make no mistake about it: Our fiscal discipline as a state is directly related to our competitiveness in today’s global economy.
All the action today in the competition for jobs is around income tax relief and reform. When Indiana adds a 10 percent tax cut to an honestly balanced budget and combines that with our reputation for education reform and workplace freedoms as well as our new commitment to cutting red tape, improving career and technical education and promoting life sciences, we will put Indiana in the lead to win the war for jobs for this generation and generations to come.
That’s how we make Indiana the state that works.