Hendricks County Flyer, Avon, IN

Commentary

May 13, 2013

Tax cuts and an 8.7 percent jobless rate

(Continued)

“But at the end of the day, I think the tax relief we crafted together was better than what I was proposing,” Pence acknowledged. “In the end, I’m convinced that income tax cut, the inheritance tax and the financial institution tax was just the right relief at the right time.”

House Speaker Brian Bosma called it the “largest tax cut in Indiana history.” House Minority Leader Scott Pelath, the Michigan City Democrat, saw it as a “missed opportunity” for the middle class: Not much money into the wallets and not enough to spur job creation.

When in full effect, the numbers look like this: $1million in income (say a small business) equals $1,700 a year; $500,000 in income (say a smaller business) equals $850 a year; $100,000 household income equals $170 a year; $50,000 household income equals $85 a year.

The $850 cut level equals about $70 a month or $2.30 a day (which would be good for a latte at Starbucks). Some speculate that an income tax cut that size will not stimulate job creation, but might help with job retention at the margins for the smaller businesses filing as individuals.

Bigger job creation potential is in the already passed cuts in the corporate income tax rate from 8.5 percent to 6.5 percent and the inheritance tax elimination. Small businesses and farms can now be passed on to subsequent generations and there likely will be fewer break-ups or sales to fund a tax liability. Banks and c-corps, in theory, will have more cash to fund expansions, make hires or return to shareholders.

Pence sees beyond the small amount of money middle class Hoosiers will get, instead focusing on $300 million eventually spilling into the state’s economy that is still beleaguered by an 8.7 percent jobless rate. It’s been in that range going on five years now. Five years.

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