Tax Reform

State of the State: Indiana

Indiana Governor Mike Pence’s 2016 State of the State focused heavily on matters of economic competitiveness, both touting the state’s strong current position, and the governor’s desire to protect the state’s competitive position by rejecting any prospects of tax increases in the 2016 legislative session.

Pence hit on economic competitiveness early in his address, noting Indiana regularly ranks in among the “top 10 best states to do business.” The ALEC-Laffer Rich States, Poor States Economic Outlook Index strongly comports with this claim, given that the most recent edition ranks Indiana third overall in economic outlook. It’s notable that under the combined reforms of Governor Pence and previous Indiana Governor Mitch Daniels, sound, pro-growth policy reforms have lifted Indiana to that third-place ranking after being 20th as recently as 2010.

He further noted the state’s strong fiscal position given the current AAA bond rating and “strong budget reserves.” According to the National Association of State Budget Officers’ Fall 2015 Fiscal Survey of the States, Indiana had a 2015 fiscal balance of 14.3 percent of expenditures, a 2016 projected fiscal balance of 13.6 percent of expenditures, and a rainy day fund balance of 8.7 percent of expenditures going into 2016. Considering Indiana’s fiscal health more broadly, the Mercatus Center ranks Indiana 16th in overall fiscal solvency, and among the top 10 in their subcategories measuring trust fund solvency and long-run budgetary solvency.

Pence went on to tout fiscal accomplishments in the 2015 legislative session. This included a third straight year of tax cuts totaling $300 million, according to his remarks. Pence highlighted cuts to unemployment taxes, but the state also cut or is phasing in tax cuts during the 2016 fiscal year to personal income, business income and business personal property. Despite Indiana’s strong fiscal climate, Hoosiers are right to continue to push on tax cuts, as the state ranks 22nd highest in overall state and local tax burden at 9.5 percent of total state income going to taxes, according to the Tax Foundation. In addition to tax cuts, Pence touted the state’s passage a balanced budget amendment in 2015, an important step in protecting the states strong credit rating.

Looking forward to 2016, Governor Pence called for greater investment and reform to infrastructure and education but called on his fellow policymakers to do so without raising taxes, noting the importance of keeping taxes low.

This is an entry in the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which will perform analysis of tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.

In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A…

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