OPINION: Pence cutting details fine on lawmakers' tax offering

A new Indiana revenue forecast released last week showed the state taking in $257 million more over the next two-year budget period. As revenue forecasts go, that’s almost a rounding error. But for Pence, it could make a huge difference.

Now, the question is whether a governor who invested much of his first-year political capital in getting a 10 percent reduction in Indiana’s individual income tax phased in over two years can plausibly claim victory over something less than that.

The projections led Republican leaders in the House and Senate to feel comfortable that they could give what they’re publicly going to bill as $500 million in tax cuts over the course of that two-year budget period.

I say publicly bill because it’s really $300 million in tax cuts. The other $200 million comes through reductions in Indiana’s corporate income tax — a decision lawmakers made two years ago, and that no one is seriously considering going back on today.

Also, lawmakers already want to devote some of that to eliminating the state’s inheritance tax, which would save those taxpayers about $150 million over those two years.

That leaves between $150 million and, if the inheritance tax cut is scaled back, $300 million that could go toward Pence’s tax cut proposal.

That’s far short of the $780 million reduction in state tax collections that would have taken place if Pence got exactly what he wanted — a 5 percent cut in the state’s income tax rate the first year of the budget and another 5 percent in its second year.

Still, it’s enough to allow Pence to save face.

Under a version of the budget approved by the Senate, the income tax cut would take place solely in the second year and it would be a 3 percent cut, rather than Pence’s 10 percent. That was much better for the governor than nothing, which is what the House’s budget included.

For Pence, the reality that he’s going to get any part of his income tax at all demonstrates what Republican legislative supermajorities can mean for Republican governors.

In previous years, House Democrats might have held out for more funding for education than the 2 percent increase in year one and 1 percent increase in year two that the House and Senate included in their budgets.

Democrats might have hoped to scotch the Pence tax cut because they sought funding for the federal health care law, and also because they hoped to deliver the new governor a political defeat.

Now, though, it’s Republican legislative leaders who are hesitant to embrace a tax cut that they are not sure is sustainable over Indiana’s long-term future. However, those lawmakers are interested in sealing a political victory, rather than defeat, for the new governor.

That’s why they’ll help Pence out in the final stages of this year’s relatively simple final budget negotiations.