INDIANAPOLIS - Now that Gov. Mike Pence is deciding whether he is satisfied with Indiana lawmakers' 2013 work product, he admitted Monday that a deal on one item -- the budget -- was a close call.
The Republican-dominated General Assembly approved a two-year, $30 billion spending plan that includes a 3 percent reduction in Indiana's income tax in 20 months and another 2 percent cut two years after that.
It's half the tax cut that Pence had made the focal point of his first-year legislative agenda, phased in over 44 months, rather than the 14 months he'd proposed.
The budget also includes two items Pence had not advocated -- the immediate elimination of Indiana's inheritance tax and a reduction in the state’s financial institutions tax, which will cost the state $170 million combined in revenue each year.
Pence said Monday that he only accepted the deal that House and Senate leaders were offering on Wednesday night, two days before the chambers cast their votes.
"We came to this process right to the end, vigorously advocating for what we thought was going to be the best tax relief for Hoosiers," Pence said. "But in the end, I’m convinced that a combination of income tax relief, full repeal of the inheritance tax, and tax relief with respect to our financial institutions in Indiana was just the right tax relief at the right time. But it came very late in the process."
Pence staked a huge amount of his political capital on a 10 percent income tax cut phased in over two years. He made the proposal the focus of his inaugural address, his State of the State speech and his press conferences.
He even made an economic case for his idea -- the full 10 percent -- in a speech he dubbed his "closing argument" in front of the Indianapolis Chamber of Commerce just eight days before lawmakers unveiled their budget proposal.
Along the way, though, leading lawmakers -- especially House Speaker Brian Bosma, R-Indianapolis -- said they were afraid his proposal might not be "sustainable" in Indiana’s future budgets.
"I think all parties concerned drove a hard bargain," Pence said.
It was last week -- when Pence and Republican legislative leaders reached a final agreement, the day before it would be made public -- when the governor said he accepted that he wouldn’t get exactly what he wanted.
"There was a lot of give and take," Pence said. "I kept on asking for what we had proposed, but at the end of the day, I think the tax relief we crafted together is better than what I was proposing."
Bosma said Monday that lawmakers "came to the right conclusion" after intense negotiations with the governor.
"It was the right blend of taxes cut in the right way at the right time," he said. "It’s very consistent with what our goal were and our top priority obviously was to get Indiana off the list of states that tax families and middle class families at the time of death."
Democrats, meanwhile, continued to lambast the product. Rep. Greg Porter, the Indianapolis Democrat who is his party's top member of the budget-writing House Ways and Means Committee, called the cuts "phantom."
He said the income tax cut -- from a 3.4 percent rate to a 3.3 percent rate in 2015, and then to 3.23 percent in 2017 -- will mean "about a buck a week" in two years to a Hoosier earning $50,000 annually.
"People have come to expect overheated rhetoric about legislative accomplishments, but the Republican claims that this past session saw the largest tax cuts in Indiana history simply are not passing any sort of sniff test," Porter said. "I know that sounds nice and juicy and large and makes for good headlines, but these are phantom tax cuts that offer little relief where it is needed the most."