Daniels To Lawmakers: Play The Ball And Raise Taxes

After delivering an extremely upbeat report of his administration’s first year accomplishments and its forward-looking approach to governing the state,Gov. Daniels shocked many observers, including us, by dropping a stink bomb by asking legislators to increase taxes for the second year in a row.

Near the end of his speech, Gov. Daniels called on lawmakers to increase Indiana cigarette taxes by at least 25 cents per pack as a way of discouraging our young people from smoking and improving the quality of our citizens’ health. That would equate to a tax increase of nearly $150 million a year. Daniels offered no other public policy reason for the need to tax Hoosiers more, or what he intended to do with the new revenues such a tax increase would generate. Last year, he disappointed Republican faithful by calling for an income tax increase on Hoosiers earning $100,000 or more per year, a class warfare approach to taxation more closely akin to a Democratic approach.

You will recall that the Republican-controlled legislature rejected Daniels call for higher taxes. Instead, the legislature approved a trimmed down budget that promised a balanced budget by the end of the biennium. Ironically, Daniels boasted of the fact that his administration had done even better than the budget approved by the legislature, promising a balanced budget one full year ahead of schedule. By finding ways to “reduce waste” and “stretch dollars”, Daniels said his administration had trimmed $200 million from the state’s budget already. His tax amnesty raised nearly as much, and the Governor won over school officials with his announcement that he would direct that $156 million of the tax amnesty proceeds be distributed to our schools to make up for the funds the state short-changed them in recent years to lessen state budget woes.

The proposed tax increase leaves us scratching our heads. You asked for a tax increase once before and the legislature told you no. You did what Republicans are suppose to do-- run government more efficiently with fewer tax dollars. You balanced the budget ahead of schedule. And then you ask us to raise taxes? And you don’t even tell us why we are raising taxes?

The tax increase is very unfortunate to say the least. With the terrific list of accomplishments over the past year, his call for a tax increase last year was all but forgotten. Now it comes running back like a bad dream. And in an election year!

Daniels has indeed achieved a good first year record of accomplishments, aside from the great job his administration has done in closing the budget gap. While holding the line on most areas of state funding, Daniels was able to divert more money to our schools, local governments, child welfare services and Medicaid and reverse a trend of the state cutting back on the funding of these critical services.

The Governor ticked off a long list of case backlogs for a variety of state agencies which the administration has made real progress in reducing for the first time in many years. We will except from his list, however, unemployment benefits, which his administration initially made worse by bungling efforts to centralize adjudicators in Indianapolis, leading to the loss of many long-time public servants.

Daniels has made great strides in cleaning up the corruption which had reached alarming levels after 16 years of Democratic administrations. The appointment of an inspector general has increased by ten-fold the number of whistleblower complaints, and more than 30 cases have been referred to prosecutors for legal action. His requirement that people who lobby the administration register to lobby state agencies not unlike legislative lobbyists are required to do is a big step forward in cleaning up government.

His administration can also boast that it has cut production of meth in the Hoosier state by one-half after just one year of efforts focused on eradicating this plague sweeping our state. His Hoosier Rx program has at the same time successfully achieved prescription drug cost reductions for more than 100,000 people. And his new rules to scrutinize spending by our public schools on new construction projects squeezed another $87 million in savings for the public.

Daniels is not stopping there. He has a very aggressive agenda for moving our state forward, including a makeover of local governments by eliminating township tax assessors and removing unnecessary layers of government through consolidation efforts, a state take-over of child welfare services to reduce local property tax burdens, and more home rule powers to give local governments flexibility to use alternative revenue sources to the property tax for funding local services. His idea of moving more education dollars into instruction away from administration through collaborative purchasing agreements among the state's school districts is another creative way of achieving more bang for the buck.

The Governor’s Major Moves program offers hope for the first time in decades of funding highway projects, like I-69, U.S. 31 and two new bridges on the Ohio River which have been left unfulfilled for decades now, despite the promises of at least our last six governors. The privatization of the northern Indiana toll-roads as a funding mechanism is not without risks. Legislators must closely examine these proposals. The last thing we want is to repeat the debacle of Indiana leaders in the 19th century with the canal projects which bankrupted the state.

In offering his ideas for the state’s future, the Governor made a baseball analogy—how a good infielder will “play the ball” rather than letting the “ball play you.” He is right to say that. But “playing the ball” in state government these days does not always mean asking everyday working Hoosiers to cough up more money in taxes. Indiana already has an extremely regressive system of taxation. The heaviest burden falls on those least able to pay, while businesses get off relatively easy compared to the way they are taxed in other states.

Hoosiers elected Daniels, in part, on his reputation as “The Blade” for his work as President Bush’s budget director. The name never really seemed appropriate since federal spending spiraled out of control during his tenure. Nonetheless, he has earned that name through his frugal management of our taxpayer dollars during his first year in office.

Indiana lawmakers should tell the Governor that he’s doing a great job managing the budget, and that he should continue “playing the ball” with existing state revenues. When he seeks re-election, he will be thanking them for that big favor.

You can read the full text of the Governor's State of the State Address here.