Hoosiers would see minuscule benefit from Pence income tax plan

Despite repeatedly noting in speeches across the state that both Indiana's $1,000 personal income exemption and the $2,500 per child exemption haven't gone up for decades, the Republican governor won't ask the Republican-controlled Legislature to boost either of them.

Instead, Pence administration officials explained Monday the governor only will propose raising the exemptions each year to match the rate of future inflation.

"It may be that we look to increase at some point in the future, but the fiscal impact of increasing it any significant amount is fairly significant, so at this point we're just looking to index to inflation going forward," said Andrew Kossack, general counsel at Pence's Office of Management and Budget.

The U.S. inflation rate from November 2012 through last month was 1.2 percent, according to Bureau of Labor Statistics.

If Pence's indexing proposal already were in effect, the amount of income exempt from tax this year would have grown $12 to $1,012 for individuals and $30 per child to $2,530.

However, the actual taxes owed at Indiana's 3.4 percent income tax rate only would have dropped 41 cents for an individual and $1.02 per child.

Kossack said over time those tiny tax cuts will build in such a way that they live up to Pence's goal of making a "difference in the lives of families."

"Everybody who files taxes will benefit from this going forward, and families -- the more children they have, the more dependents they claim -- will benefit more," Kossack said.

He brushed off questions about the insignificance of the income tax change, estimated to cost the state about $6 million in revenue, compared to the $1 billion in property tax revenue Pence has proposed taking from schools and local governments and returning to Indiana businesses.

Kossack said there's no mandate that local income or property taxes be hiked on individuals and homeowners to make up for the lost business personal property tax revenue -- which makes up 17.5 percent of property tax revenue in Lake County and 13.5 percent in Porter County.

"There are a number of reforms that could be implemented, one of which would be a local option for doing that," Kossack said. "So if a county exercises that option, it's not necessarily true that they would have to offset those costs on homeowners."

House Democratic Leader Scott Pelath, D-Michigan City, scoffed at Pence's tax plans and said they continue "the recent tradition of leaving our state's middle class by the side of the road."

"This is why we must dedicate the 2014 legislative session to creating jobs that help lift our Hoosier middle class, rather than hand out more tax cuts to corporate boardrooms and debate a marriage amendment that will drive the best and brightest away from Indiana," Pelath said.