The new budget plan in Indiana is a disaster for taxpayers that promises future pain.
Legislative leaders, Speaker Huston, Senate Finance Chair Ryan Mishler, and Gov. Braun announced a budget agreement Wednesday and rushed it through in the middle of the night early Friday morning (with an old fiscal note).
The plan will slam Hoosiers with tax hikes that are extremely likely to miss revenue projections and cause future headaches for taxpayers.
A late revenue report threw a wrench into budget plans in Indiana. Seeming panic over these numbers has resulted in lawmakers putting together a series of tax hikes, with some spending reductions, to cover the budget hole.
This budget violates the Taxpayer Protection Pledge as it is a net tax increase. Hoosier lawmakers who signed the pledge, and all Republicans who vote for this plan are going against promises to vote against tax increases and to control spending.
The targets of the tax hikes seem like they were selected based on their political convenience, as tobacco products were singled out.
The tax on a pack of cigarettes would go up by 300%.
Taxes on vapes would go up as well, making live-saving alternatives to smoking more costly. Cigar taxes also would go up.
These hikes are likely to miss revenue projections as smuggling picks up and people try to find alternatives to paying the high tax rates. Indiana would have the highest cigarette tax in the region under the budget agreement.
Only three out of 32 state tobacco increases between 2009 and 2013 met tax revenue estimates and for this reason, economists and tax policy experts view tobacco taxes as unsound policy, and it is highly unlikely that revenue estimates will be met.
These networks, who also engage in human trafficking & money laundering, have also been used to fund terrorist and the US State Department has explicitly called tobacco smuggling a “threat to national security”. In neighboring Illinois, over one quarter of all cigarettes sold are illicit, and this proposal would doubtlessly lead to similar results in Indiana.
Worse for those seeking revenues, an analysis from Mackinac Center shows such punitive rates can even reduce tax collections.
Prospects for tax reform in the future are now more gloomy for all Hoosier taxpayers.
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Author: Doug Kellogg
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