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Trump Taps Tax-Cutting Indiana Governor for Vice President

Posted on July 18, 2016 by Curry, Jonathan

Following a week of speculation, presumptive Republican presidential nominee Donald Trump announced July 15 on Twitter that Indiana Gov. Mike Pence would join him on the Republican ticket as his vice president, bringing with him a reliably conservative record of tax cuts.

Whereas Trump has been criticized by some Republicans for inconsistencies in his positions, Pence brings solidly conservative credentials to the Republican presidential ticket, including on tax policy. The governor's website claims he has "enacted the largest state tax cut in Indiana history," and, as governor, Pence has signed a steady procession of bills to either reduce or outright repeal taxes throughout his term.

"He's a stereotypical, traditional Republican," Richard Auxier of the Urban-Brookings Tax Policy Center told Tax Analysts, adding that Pence is "definitely a promoter of tax cuts for economic growth."

Pence, who won the election for governor in 2012, was part of a wave of Midwestern Republican governors elected following the Great Recession, and they campaigned on a platform of tax and spending cuts and balanced budgets. Two of Pence's fellow Midwestern governors, Scott Walker of Wisconsin and John Kasich of Ohio, also ran for president in the 2016 Republican primaries before bowing out of the race.

Pence frequently touts the benefits of tax cuts in his State of the State addresses. "We all recognize that low taxes are essential to attracting investment and good-paying jobs," Pence said in his 2014 address, and similar statements can be found in his other addresses.

"I think Indiana is a great success story for tax reform in the state level," Scott Drenkard, director of state projects for the Tax Foundation, told Tax Analysts. He said that the previous governor, Republican Mitch Daniels, is often credited with laying the groundwork for many of the tax changes in the state, but that Pence deserves credit for speaking "positively and effectively for broad tax reform concepts," which the state legislature then turned into bills.

"The net changes that came out of that were really balanced and measured corporate tax reductions over a long time frame," Drenkard said. He noted that Pence has also signed into law reductions in the individual income tax rates, elimination of the state's inheritance tax, reductions in business property tax rates, and tax simplification measures, all while maintaining a balanced state budget. 

Drenkard disagreed with the characterization of Pence as a "stereotypical" tax-cutting Republican. There are right ways and wrong ways to go about cutting taxes, he said, referring to the tax cuts and subsequent budget troubles facing Kansas under Republican Gov. Sam Brownback.

John Ketzenberger of the Indiana Fiscal Policy Institute was reluctant to give Pence and his tax policies too much credit for the state's balanced budget.

Pence's tax and spending actions as governor are an extension of the work that was done under the Daniels administration, Ketzenberger said. He added that while Pence's tax policies have been "generally favorable to business" and have been politically effective, they have been "practically null in terms of the economy." Ketzenberger also questioned whether the state's tax cuts would be sustainable in the long term.

Auxier was also skeptical that the effectiveness of Pence's tax policies can be graded by looking at the state's economic growth. "The 'governor's effect' is limited," he said, emphasizing that "it's far better to look at his policy decisions to get a sense of who this person is than to try and measure the economic changes in Indiana over that short period of time."

Tax Transparency

For Greg LeRoy of Good Jobs First, Pence's fiscal record as governor is marred by his handling of the state's tax incentive program, particularly concerning the tax incentives and grants distributed by the Indiana Economic Development Corp. (IEDC).

The IEDC was created by Daniels, but a scandal involving bribes offered to Chinese officials and concerns that the public-private partnership was hiding failed business ventures to make the program appear more successful prompted Pence to sign into law in his first year as governor legislation that would make the IEDC's job creation programs more transparent.

However, LeRoy noted that a subsequent investigation by WTHR, an NBC affiliate in Indiana, determined that even after the transparency law was enacted, the IEDC continued to hide details about failed projects, which inflated its success rate.

"[Pence has] gotten sneaky about cooking the books and it doesn't impress me," LeRoy said. He also said the state's incentive programs have allowed more corporate influence in the state's decision-making.

However, Drenkard disagreed with that assessment, saying that overall, Indiana under Pence as governor has been a "national leader in accountability on tax incentives." The state conducts a biennial review of its business incentives and eliminates any that do not work, Drenkard said. He referred to a 2014 review of Indiana's tax incentives by Jeff Chapman of the Pew Charitable Trusts that praised the state for making "real progress" in tax incentive accountability by adopting several measures since 2012.

Congress Member Pence

Before being elected governor, Pence served six terms as a member of the U.S. House between 2001 and 2013. He chaired the Republican Conference from 2008 to 2010, helping Republicans become the majority party in the House in 2010.

Pence was a longtime supporter of the FairTax, which would repeal federal income and employment taxes and replace them with a national sales tax. Pence cosponsored FairTax legislation in each session of Congress from 2005 to 2012. The plan's proponents say it would also make the IRS unnecessary.

Liberal groups like Citizens for Tax Justice have blasted the FairTax as a highly regressive form of taxation that shifts the tax burden onto low- and middle-income taxpayers, and the concept has fallen out of favor with some conservatives as well. 

Other legislation Pence introduced during his time in Congress includes a 2010 bill that would have extended all of the Bush tax cuts, repealed the estate tax, and permanently patched the alternative minimum tax. He also supported and pushed for a constitutional balanced budget amendment.

The Pence Effect

As for whether Pence's approach on taxes will have any effect on Trump's tax reform plans is less clear. "It's anybody's guess what Trump will settle on for his ultimate tax reform plan," Drenkard said.

The Trump campaign has been working with Heritage Foundation economist Stephen Moore and CNBC commentator Larry Kudlow to revise and reduce the cost of Trump's tax plan, which has been lambasted by both conservatives and liberals for its high cost, estimated at roughly $10 trillion over a decade. 

Moore told Fox News recently that the revisions will dramatically reduce the 10-year cost of Trump's plan and later told Politico that the revised plan would likely be released after the Republican National Convention, set to begin July 18.

Ketzenberger said he did not expect Pence's fiscal record to be a liability to the Republican presidential ticket.