Indiana Lt. Gov. Suzanne Crouch listens to Columbus Municipal Airport Director Brian Payne talk about the airpark and airport before she tours Columbus Propeller in Columbus, Ind., Wednesday, March 8, 2023.
Mike Wolanin | The Republic
Lt. Gov. Suzanne Crouch last week announced she wants to push to eliminate the state’s income tax, if she’s elected governor of Indiana next year.
“Axe the Tax” is the slogan she’s using for this new proposal. But Crouch, a Republican vying for the governor’s office in a crowded primary, gave few answers on what the plan is to make up for the roughly $8 billion the state brings in from income taxes. Her Republican opponents also are skeptical about her proposal, as they said in different statements online and to reporters since her announcement.
If elected governor, Crouch told the Daily Journal she hopes to accomplish scrapping the income tax in her first term. She said she’d start pushing for it in the next budget, which will be drafted by the Indiana General Assembly in 2025, when a new governor takes office.
Her campaign estimates eliminating the income tax could save Hoosiers with an average income between $1,500 and $2,000 per year.
“I trust that Hoosiers know better how to spend their money than the government. We also are at a position where we have a $3 billion surplus,” Crouch said.
Indiana lawmakers have already been eyeing the individual income tax for the chopping block. In 2022, lawmakers approved legislation to gradually lower the 3.23% tax rate over time. The rate dropped to 3.15% this year, and is set to fall to 2.9% by 2027. Lawmakers last year, with Senate Enrolled Act 3, established the State and Local Tax Review Task Force to look at the state’s overall tax structure, finances and ways to eliminate the income tax.
Though the General Assembly will ultimately make the call to cut taxes, Crouch said she announced this platform to let voters know cutting the income tax is a priority for her. Though it may seem like state lawmakers are looking to eliminate the tax, that sentiment is not shared by everyone in the Legislature, she said.
“For me, I wanted Hoosiers to know that what my priority as governor would be and that is, as governor, I would work to eliminate the income tax,” Crouch said.
The income tax is the second largest source of tax revenue for Indiana, bringing in roughly $7.5 billion to $8 billion each year. Crouch would not get into too many specifics about plans to make that up, but said she would not propose it if she didn’t think it was a responsible fiscal policy.
Her plan is more than just cutting the income tax, it’s also about cutting government spending, Crouch said. Part of her proposal to make the tax cut work includes looking at “efficiencies” in Indiana’s current government operations, and cutting back spending where necessary. She did not specify what areas of state government that she would cut, or where she sees inefficiencies now.
“Every agency and every department, they’ll all be looked at, and you know, we’ll be able to realize the efficiencies by doing so,” Crouch said. “I want to stress this is not a tax replacement. This is a tax cut.”
She wants to work with state lawmakers on plans to make up for that tax revenue. Part of that also includes looking at modernizing the state’s tax structure, which lawmakers are already working toward. Crouch did not say definitively if she would be for or against raising other taxes, such as the sales tax, to make up for cutting the income tax.
She did point out that other states that rank above Indiana in the Tax Foundation’s State Business Tax Climate Index, either don’t have an income tax or a sales tax, or don’t have either. Alaska, which ranks third on that list while Indiana ranks ninth, has no income tax and no sales tax. Florida, which ranks fourth on the index, is an example of a state that has no income tax, but does have a sales tax.
Seven states do not have an individual income tax, according to the Tax Foundation. Among states that have an income tax, Indiana’s is the fourth lowest at 3.15%.
Crouch said that eliminating the state income tax would boost the economy, thus bringing in more revenue, by giving money back to Hoosiers to spend back into the economy, and also making Indiana more attractive for business.
“When we end up eliminating our income tax, it’s going to put us to the front of the pack because I don’t want Indiana to just compete with other states. I want Indiana to win when we’re competing with other states,” Crouch said.
She also said the elimination of the tax would be done responsibly, with triggers in place to slow down the cut of the tax if Indiana were to face an economic downturn.
Other candidates in the crowded Republican primary for governor, though not opposed to lowering taxes, were more skeptical about Crouch’s proposal for eliminating the income tax. Other GOP candidates include U.S. Sen. Mike Braun, Fort Wayne businessman Eric Doden, former Attorney General Curtis Hill and former Secretary of Commerce Brad Chambers.
Braun, when speaking to reporters last week prior to Crouch’s proposal announcement, touched on the topic of cutting the income tax, the Indiana Capital Chronicle reported. He questioned how to replace that $8 billion in the budget and he has not heard a plan for that yet, without possibly raising sales taxes or property taxes.
Doden, in a statement to the Capital Chronicle and other outlets, also said he was for reducing taxes, but he would worry about the negative impacts of cutting the income tax.
“I’m concerned that the “axe the tax” plan axes resources to help taxpayers in our small towns and hometowns plagued by fentanyl and mental health crises, which will be my number one priority as Governor,” Doden said in a statement to the Capital Chronicle.
Hill posted on X, the social media platform formerly known as Twitter, questioning how Crouch plans to replace that revenue, and he also criticized her for not being a conservative.
“From mask mandates to progressive government offices, Crouch has willingly embraced Gov. Holcomb’s liberal agenda. Nice conservative talking points, but no conservative solutions,” Hill said in the post.
In a press release, Libertarian candidate Donald Rainwater pointed out that he presented a plan to abolish the state income tax when he ran for governor in 2020. He challenged Crouch’s plan, and proposed going further to cut government spending and taxes. Rainwater said he would propose a four-year freeze on the state budget requiring the General Assembly to not add any new spending or taxation to the budget through the end of 2028. He also would propose further capping property taxes and rolling back vehicle excise taxes and gas excise taxes. He said the state does not need to find replacement revenue for cutting such taxes.
“We simply need to hold our state government accountable for the out-of-control spending, eliminate excessive taxation and encourage population growth by financially incentivizing more people to move to Indiana,” Rainwater said in the statement.
