Pence will press Legislature for income tax cut

"That's my priority, and I anticipate my first budget will reflect my priorities," Pence said.

Pence's tax-cut plan, first announced during the campaign, would reduce the income tax rate to 3.23 percent in 2014, enabling Hoosiers to keep $261 million. The current tax rate is 3.4 percent.

But legislative leaders, including House Speaker Brian Bosma, R-Indianapolis, worry further reductions in state revenue at a time of economic uncertainty could drain Indiana's $2 billion budget reserve.

The rate would drop to 3.06 percent in 2015, reducing state government revenue by $534 million, or about 4 percent of Indiana's $14.2 billion in annual revenue.

"With 8 percent unemployment in Indiana, we've got to make job creation job one -- and I believe because of the fiscal strength of our state -- Indiana can fund our priorities and put more dollars in the pockets of working Hoosiers and job creators," Pence said.

In the past two years, the Republican-controlled Legislature has reduced the corporate income tax rate and approved a 10-year phaseout of the state's inheritance tax, sapping more than $200 million a year from the state's bottom line when both are fully implemented.

"Our team has a long-term vision, not a campaign-oriented vision, for how we budget," Bosma said. "Any tax cut has to be sustainable."

Gaming revenue, the state's third-largest source of money behind sales and income taxes, also has declined in recent years due to increased competition from casinos in other states.

Some calling for compromise

Bosma said many lawmakers have told him they hope to reverse some of the deep budget cuts, particularly to education, imposed by Republican Gov. Mitch Daniels when tax revenue cratered during the Great Recession in 2009-10.

Kevin Brinegar, president of the Indiana Chamber of Commerce, said that spending -- coupled with increased state costs to implement Obamacare -- may make Pence's tax cut unaffordable. 

"We won't be able to do it all, so there's going to have to be some prioritization that takes place, and lots of legislators have lots of ideas," Brinegar said. "The governor-elect has ideas, and those ideas and those priorities will have to be reconciled."

A new state revenue forecast is set to be released Dec. 17. That estimate, compiled by the nonpartisan Legislative Services Agency, will predict how much tax money Indiana can expect to take in during the 2014-15 budget period, which begins July 1, 2013.

State Rep. Tim Brown, R-Crawfordsville, chairman of the budget-writing House Ways and Means Committee, said he's waiting for that forecast and its April 2013 update before deciding whether he can support Pence's tax-cut plan.

Not all state lawmakers feel the need to wait, though. State Sen. Mike Delph, R-Carmel, took to Twitter on Thursday to endorse the proposal.

"I support Gov.-elect Mike Pence and his vision for Indiana as well as his desire to bring tax relief to Indiana residents," Delph said.

Pence, a six-term congressman who takes office as governor Jan. 14, said he's willing to negotiate with lawmakers but enacting the tax cut is his top priority.

"I hold our legislative leaders in the highest regard and I look forward to submitting a budget in early January that reflects our priorities, and I look forward to discussions and collaborations going forward," Pence said.