Fact checking Trump’s claims about Pence’s tax cuts in Indiana

President Donald Trump is touting the tax cuts Vice President Mike Pence signed into law as Indiana governor as a national model.

"Indiana is a tremendous example of the prosperity that is unleashed when we cut taxes and set free the dreams of our citizens. This state has claimed a powerful competitive edge built on low taxes and less regulation," he said during his speech Wednesday at the State Fairgrounds. 

He went on attribute Indiana's economic status to Pence, who he said "signed the largest income tax cut in the state's history" as governor. 

So what’s the truth about Pence’s tax cuts in Indiana?

The tax cuts

Pence kicked off his first year as governor with a call to cut personal state income taxes by 10 percent. But the Indiana General Assembly, where Republicans held more than two-thirds of the seats, resisted. Leaders worried about whether the state budget could sustain such a cut. Americans for Prosperity, part of the political network affiliated with billionaire industrialists Charles and David Koch, came to Pence’s aid with television ads targeting lawmakers. Eventually, lawmakers agreed to a 5 percent cut.

College basketball scandal:Gregg Doyel: Rick Pitino had to go this time

A new sponsor:Klipsch Music Center, formerly Deer Creek, will be renamed after mortgage company

Pence and lawmakers also agreed to several other cuts during his time as governor. The state’s budget office estimated that in all, the tax cuts would amount to $580 million a year when fully implemented in 2022. Some of those cuts began under Pence’s predecessor, former Gov. Mitch Daniels, but were accelerated under Pence.

Here’s a breakdown of the cuts:

• A 5 percent reduction to the personal income tax passed in 2013 that is expected to cost about $200 million to $300 million in each of the next few years.
• The elimination of the inheritance tax in 2013 that is expected to cost about $165 million a year.
• Corporate income tax cuts passed in 2013 and 2014 that are expected to cost more than $190 million a year when fully implemented in the fiscal year 2022.
• Financial institutions tax cuts passed in 2013 and 2014 that are expected to cost more than $40 million a year when fully implemented.

The impact

Indiana’s unemployment rate has dropped significantly since the cuts were implemented, falling to 3.5 percent in August. Now, much of the debate ahead of next year’s legislative session is focused on workforce shortages.

But Indiana’s recovery under Pence also can be seen as part of the broader national economic recovery during his time in office.

Critics of Pence also argue that the cuts — especially the inheritance, corporate and financial institutions cuts — disproportionately benefited wealthier individuals.

Related:

Trump issues warning:If Donnelly blocks tax plan, 'we'll campaign against him like you wouldn't believe'

Protesters:Demonstrators changed 'no hate in our in our state'

Social media reaction:What people are saying about Trump's visit and speech

Another key fact to consider: As soon as Pence left office, lawmakers raised taxes.

A road funding package that includes a 10-cent gas tax increase and new vehicle registration fees was signed into law by Republican Gov. Eric Holcomb and is expected to raise $1.2 billion annually by 2025 to pay for highway and bridge maintenance.

Supporters of the road funding plan pitched the gas tax increase as a “user fee.” Those who use the roads will end up paying for them.

But economists say there’s another way to look at new road taxes when placed in the context of the tax breaks during Pence’s time in office — as a large share of the state’s tax burden shifted from higher income to middle-income Hoosiers.

Democrats in Indiana are also quick to point out that income growth in Indiana has lagged the rest of the nation. While Indiana’s tax climate might help attract new jobs, they are often low-wage jobs, critics say.

Largest in state history?

The 5 percent individual income tax cut under Pence was Indiana’s largest income tax cut, but it was fairly modest. The state’s flat rate dropped from 3.4 percent to 3.23 percent this year. That reduction is expected to save someone who earns $50,000 a year about $85 annually.

When one takes into account other kinds of tax cuts, Pence’s is far from the largest in state history. Statewide caps on property taxes put into place under Daniels were projected to save taxpayers $800 million in 2016.

The property tax caps primarily impact local government, which is why Pence frequently — and carefully — touts his tax cuts as the largest “state” tax cut in Indiana history.

Call IndyStar reporter Tony Cook at (317) 444-6081. Follow him on Twitter and Facebook.