DOWNHAM: A path to prosperity in Indiana

Lower income taxes will ensure Hoosiers’ future

Indiana takes great pride in being the crossroads of America. Right now, our state leaders face a crossroads of their own: whether to reduce income taxes for hardworking Hoosiers or to follow the road of more government spending.

By calling for a 10 percent income-tax cut for Indiana taxpayers, Gov. Mike Pence has mapped the right way forward for our state. Lowering taxes is the right choice for Indiana if we want to put our state on the road to a healthy economy, job growth and increased opportunity. Simply put, it’s the right thing to do.

Like the rest of the nation, Indiana suffered mightily from the 2007-09 recession and the subsequent sluggish recovery. However, unlike many states, we were fortunate to have leaders in Indianapolis who did the right thing by reducing government spending and keeping taxes relatively low. Our state leaders, such as then-Gov. Mitch Daniels, understood that to encourage business growth, we need to keep the growth of state government in check.

We’ve seen solid results from that formula over the past few years. While other states wrestle with deteriorating fiscal situations, Indiana actually boasts a budget surplus of more than $500 million.

That formula also made Indiana more competitive when it comes to attracting job-creating businesses. In fact, in 2012, Chief Executive magazine surveyed corporate leaders around the nation on the best states for doing business, and they ranked Indiana fifth in the nation.

These results suggest Indiana is on the right track. The question is, how do we build upon this enviable position and keep growing?

The answer is by returning tax dollars to those who earned them in the first place. Mr. Pence’s plan calls for returning a portion of the budget surplus to the taxpayers, while holding the line on government spending. Mr. Pence’s proposal would reduce the state’s income tax from 3.4 to 3.06 percent. More than 4.4 million Hoosiers would see lower taxes under this plan, which would put some $500 million per year back into families’ pockets and small business’ budgets.

Hoosiers don’t have to choose between putting money back in the real economy or schools and good roads.

Mr. Pence’s budget actually prioritizes kindergarten-grade 12 education and transportation, as well as adequate funding for the state’s essential needs. We would do this while at the same time maintaining our budget reserves (about $2 billion), ensuring that we would be prepared for the future.

Unfortunately, some in Indianapolis oppose Mr. Pence’s proposal to keep Indiana on its winning track. They argue that the surplus money should be poured into state government programs and that taxes have been reduced enough over the past 10 years. While these officials may mean well, they seem to think that more government spending will create economic growth and prosperity. Their reasoning is flawed.

When it comes to endless government spending, we know where that road leads. In fact, we don’t have to look too far for an example: A glance at the neighbor to the west, Illinois, offers a cautionary tale of what can happen when government grows without constraint.

In January, Illinois analysts published an economic forecast warning that the state is in danger of slipping back into recession. “Poor state finances” was one of the key reasons the forecast cited for Illinois’ poor economic performance. At the same time, Illinois has one of the highest combined state and local tax burdens in the nation (11th), according to the nonpartisan Tax Foundation. In fact, they’ve hiked taxes repeatedly, kept growing government and have still been unable to close their yawning budget gap.

The demands of an ever-growing state government — which inevitably means more and higher taxes — have brought our neighbors in Illinois to a ruinous fiscal position. Too many other state governments, not to mention our federal leaders in Washington, have followed the same disastrous course.

That’s not the future Hoosiers want for Indiana. We think Indiana can and should continue being the beacon of fiscal responsibility and lower taxes in the Midwest. It’s up to the Indiana state legislature to decide which path we take, and its decision will come soon. A vote on the budget is due any day. Taxpayers throughout the Hoosier State and the rest of the nation are watching.

Chase Downham is state director of Americans for Prosperity - Indiana.

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