STATEWIDE (Indiana Capital Chronicle) – Gubernatorial candidate and Lt. Gov. Suzanne Crouch released a video Thursday declaring her intention to ‘axe the tax’ if elected next year — a bold promise to eliminate the state’s low individual income tax without raising any other taxes on Hoosiers.
But the details on how to do so were scant.
In an interview with the Indiana Capital Chronicle, Crouch said her proposal came from voters who told her they struggle under inflation attributed to ‘Bidenomics,’ a term used to describe the economic policies of the Biden administration. Additionally, she said doing away with the tax would make Indiana more competitive and boost its economic standing.
“I mean, they can’t afford gas, they can’t afford groceries,” Crouch said. “… but what makes it relevant now is because we do have an almost $3 billion-dollar surplus. In addition to that, we have an opportunity to really take Indiana from good to great.
“We can start by eliminating the income tax and putting more money into Hoosier pockets,” Crouch continued.
The latest state budget totaled $44.5 billion, or more than $22 billion in expenditures annually and set aside nearly $3 billion in reserve accounts to cover rainy days, tuition support shortfalls or Medicaid spending gaps. The individual income tax nets roughly $8 billion each year.
On X, the platform formerly known as Twitter, competitor Curtis Hill, the state’s former attorney general, had his own criticism of Crouch’s announcement to ‘axe the tax.’
“Indiana pulls more than $7.5 billion in income tax. What is her plan to replace this revenue? From mask mandates to progressive government offices, Crouch has willingly embraced Gov. Holcomb’s liberal agenda. Nice conservative talking points, but no conservative solutions,” he tweeted.
How it works
Crouch’s ‘axe the tax’ website called for a “reasonably necessary” reserve fund, specifically calling out the $3 billion surplus. But she declined to say whether that amount was too much. It falls in the 10-15% savings range traditionally recommended by fiscal experts.
The tax cuts would come combined with identifying “efficiencies” in government, Crouch said, but didn’t specify any areas of state government that she would cut or were inefficient now. She added that her office of lieutenant governor, part of state government, wouldn’t be spared.
Instead, a commission would produce something similar to the 2007 Kernan-Shepard report on reforming township government but with a focus on identifying state government savings.
Crouch acknowledged that she alone couldn’t enact cuts because power over the state’s purse strings belongs to the General Assembly, which is currently studying tax reform in a commission composed of lawmakers and experts.
“I understand and very much appreciate the role that the legislature plays and respect that,” Crouch said. “But I want them to know that, as governor, I’ll lead the fight in this and this is the direction I believe Indiana needs to take.”
Suzanne Crouch included a few details on how to make her proposal work:
- Modernize our tax code to reflect the Indiana economy of the 21st century
- Limit the growth and cost of Indiana government to necessary levels
- Realize new revenues from the dynamic economic impact of the above steps
- Limit expenditures to a 2% inflation adjusted growth rate. This year’s budget increased 3.4%
Trigger reductions and elimination based on realizing key base-line revenue levels or other appropriate benchmarks, which triggers could reflect
Once triggered, phasing in reductions and elimination for revenue predictability
Crouch pivoted from cuts, saying the state would see additional revenue generated by increased economic activity following the income tax cuts.
“We’re going to be giving Hoosiers more money to make decisions as to what they’re going to spend their money on and that, in turn, is going to continue to grow our economy,” Crouch said.
She emphasized that the cuts would be “responsible,” with built-in triggers based on revenue, expenditure growth or the consumer price index.
“We’re not going to do this overnight; it’s not going to happen in one year,” Crouch said.
Crouch didn’t say whether she discussed her proposal with the State Budget Agency or economic experts.
“I’ll tell you the experts I listen to … are the Hoosiers that I interact with every single day; the Hoosiers that are making the sacrifices and taking the risks to put our state onto a path of prosperity,” Crouch said.
‘The devil’s in the details’
When asked Thursday, Gov. Eric Holcomb said he looked forward to seeing results from the legislative commission studying tax cuts and hadn’t reviewed the ‘axe the tax’ plan from his second-in-command.
“I think it’s encouraging to hear talk about how to improve (and) how to make our state even more attractive. The devil, of course, is always in the details: what do you cut or what do you raise? How do you replace or do you not replace (that revenue)?” Holcomb said. “Replacing $8 billion … it’s a lofty goal.”
Earlier this week, U.S. Sen. Mike Braun, another GOP contender, told reporters that a plan to eliminate the state’s income tax would require careful consideration.
“You’re going to have to be sober; how do you replace $8 billion in your budget? Nobody has told me how you do that. Any other place you’ve got higher sales taxes or property taxes or you’ve got things like franchise fees and taxes. You’ve got to really look at what is the cost per capita of your government and are you delivering the services that you need?” Braun said.
Currently, seven states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming — have no income taxes.
“… I’d have to see what other states have done — do they have a higher than normal sales tax? Which has got its pros and cons. Where are you property taxes? Obviously that’s been an issue in terms of what COVID did to skew real estate prices. In a system that was supposed to be reflective based upon the market, actually it skewed things in a difficult direction for many families,” Braun continued. “I hear more complaints about property taxes and (I) am willing to look at that as something that needs to be tweaked or adjusted.”
The newest gubernatorial candidate to announce, former Indiana Secretary of Commerce Brad Chambers, declined to weigh in on the proposal.
The final gubernatorial frontrunner, Fort Wayne businessman Eric Doden, didn’t respond to requests for comment.