It’s a catchy phrase, “axe the tax,” and the idea of eliminating the state income tax is a simple thing for voters to understand. But that annual $8 billion in tax revenue provides services that can’t be swept under the rug for cuts to be named later.
Lt. Gov. Suzanne Crouch, a Republican gubernatorial candidate pushing the proposal, has said the how is not as important as the why and what. As someone who has read the state budget over the years, I have to respectfully disagree.
So I thought I would show you what exactly you would have to cut to cover the $8 billion in revenue that would go away. The current biennial budget spends $44 billion, or about $22 billion a year.
First, Crouch says the elimination of the tax will result in increased investment in the state and therefore more tax revenue from corporate, sales and other taxes. But there are no estimates or analysis showing if that happened in other states that went through a similar transition.
And second, she and others also say there are efficiencies that can be found in state government. This is likely true, to the tune of millions. But billions? Absolutely not.
After all, Republicans have controlled the governor’s office since 2005 and had supermajorities in the General Assembly for at least a decade.
If there are billions in wasteful spending in the state budget, that doesn’t say much for GOP fiscal stewardship.
But I’ll be charitable. I will start off by positing that efficiencies and new investment will cover $1 billion of the lost revenue.
Now where do we find the next $7 billion?
Education covers half of the state budget so you have to start there. Abolishing the controversial state-paid voucher system would save about $500 million.
I’m not an accountant so I’m going to keep cuts nice and simple: 10%. And a 10% cut in tuition support to public schools would save $880 million. Of course, without that money, there would likely be hundreds of teacher layoffs, larger class sizes and fewer art and music classes.
Our total is now $2.38 billion.
Next up, we gut economic development funding. First, the quality-of-place program READI that has funneled hundreds of millions to local communities. That is $250 million next year. Plus, the $500 million “deal-closing fund.” We can also get rid of the 21st Century Research and Development Fund and the workforce cabinet, for savings of about $45 million.
The running total is now $3.175 billion.
No one likes road construction, so let’s do less of it. A 10% cut would save $220 million.
Now, we are at $3.395 billion.
Medicaid — or health care for the poor and disabled — is the fastest growing segment of the budget. It’s a mix of state and federal funding. A 10% cut in state dollars would save $330 million. But it would come with more Hoosiers going to hospitals as a last resort, ultimately meaning we all pick up the bill — with higher costs.
Our total is now $3.725 billion.
Next up, we stop paying for new buildings on college campuses. In the new budget, that is about $600 million.
We are up to $4.325 billion.
We could cut 10% of the Indiana Department of Correction budget, netting us roughly $100 million.
And the Indiana Attorney General’s Office isn’t required by the Constitution, so abolishing it would save about $30 million.
So now we are at $4.45 billion.
Canceling other state building projects — from new prisons, to state park inns and an archives building — would save $1.25 billion.
That brings us up to $5.7 billion.
I give up, but I think you get the idea. It is much harder than it sounds in a campaign clip.
Do we reduce how much funding goes to protecting abused and neglected children? Do we slash health funding? Eliminate the Department of Environmental Management? Who needs the Department of Natural Resources, anyway?
I’m being tongue-in-cheek, but the matter is serious. And these are questions that should be dealt with now, not sometime later after the damage of eliminating a tax is done.
Niki Kelly is editor-in-chief of indianacapitalchronicle.com, where this commentary previously appeared. She has covered Indiana politics and the Indiana Statehouse since 1999 for publications including the Fort Wayne Journal Gazette. Send comments to [email protected].
