Analysis: Mike Pence faces tough battle with legislature over tax cuts
By Lesley Weidenbener
Lesley Weidenbener, managing editor, The Statehouse File
INDIANAPOLIS – A standoff is brewing between Republican Mike Pence and the leaders in the Indiana General Assembly over the governor-elect’s plan to cut income taxes, a reminder that you don’t need divided government to have conflict.
But in this GOP battle, the House and Senate leaders – true veterans of the legislative process – may have the upper hand.
Pence, who takes office Jan. 14, acknowledged this week that while he’s had some budget experience as a congressman in Washington D.C., he’s new to the process in Indiana. And you can bet those Indiana legislative leaders will want to remind Pence that they lead an equal branch of state government.
Still, this will likely be a friendlier duel than it would have been if Democrats controlled the legislature. Partisan battles turn uglier faster in part because the public expects the political parties to disagree.
When the fight is internal, the language is typically softer and the arguments more cautious. But often these conflicts are more interesting.
In this one, the battle lines are being drawn even before Pence takes office. He promised a 10 percent income tax cut during his campaign – in which he defeated Democrat John Gregg – and has said he intends to make the plan his top legislative priority.
Legislative leaders – particularly House Speaker Brian Bosma, R-Indianapolis – have been warning since before the November election that the cut may not be possible immediately. They argue that the General Assembly has recently cut a couple other taxes and that budget writers are only now working those reductions in revenue into state spending plans.
Long has also said that while the state’s cash position is enviable, the future remains unclear. Some economists are worried about a recession if Congress can’t make a deal – or even if it does – on federal tax increases and spending cuts. The state’s gambling revenue is under threat from casinos in Ohio and Illinois. And the costs the state may face under the federal health care law are uncertain.
Bosma even reminded reporters recently that he’s the one that stopped outgoing Gov. Mitch Daniels from raising income taxes during that Republican’s first legislative session. And Bosma said he won’t be afraid to stop the new governor from cutting them.
So Pence is facing an uphill battle as he prepares for his first session.
What would help is a new argument.
Speaking at Indiana Chamber of Commerce event on Thursday, Pence told business leaders that the state has a larger cash surplus than ever before. He said he’ll present a budget plan that maintains the state’s surplus while still cutting income taxes by 10 percent, a move that will reduce annual revenue by some $525 million annually.
But so far, Pence hasn’t told lawmakers anything they don’t already know about the state’s budget. Yes, the state has more than $2 billion in cash – more than ever before. But $2 billion doesn’t go as far as it did just a few years ago. So the “largest in history” argument doesn’t mean much.
And Pence is dealing with lawmakers who have been through tax increases and tax cuts many times. They remember well the years in which it seemed like the state was swimming in cash only to cut taxes and then face tough times that called for cuts in key programs. They also remember tax cuts that were supposed to spur economic activity but seemed to just get lost, so that Hoosiers never fully recognized the break they had received.
These are legislative leaders with history, with experience and with significant political savvy and they’re strong enough not to be swayed into action simply because a governor of their own party is proposing a plan that may be popular with Hoosiers.
That’s why Pence needs a new argument. It won’t be enough simply to claim the state can – in this moment – afford to give some cash back to Hoosiers. He’s got to find a way to look long term, to show that over the next few years, maybe even the next few decades, this tax cut won’t come back to haunt the state.
After all, lawmakers are far more likely to still be in office when the impact of such moves is fully felt.
It could be the first major test of Pence’s leadership and the internal party battle could set the tone for legislative-executive relations for years to come.
Lesley Weidenbener is managing editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.