Lt. Gov. Suzanne Crouch, running for governor, proposes eliminating state income tax

Corrections and clarifications: An earlier version of this story misstated the amount of cash the individual income tax raises for the state each year. It's roughly $7.5 billion to $8 billion.

Lt. Gov. Suzanne Crouch says she wants to eliminate the individual income tax by the end of her first term if she's elected governor of Indiana.

It's a familiar refrain among the halls of the Statehouse lately ― Senate Republican leaders have said they are interested in doing this eventually, and a budget deal they struck speeds up income tax cuts down to 2.9% by 2027. But Crouch's goal would significantly quicken that pace, with the idea of keeping more money in Hoosiers' pockets and attracting more workers to live in the state.

"Hoosiers need to keep more of their own money to secure their livelihood in the era of Bidenomics," Crouch told IndyStar. "Groceries, energy prices, interest rates, and other household expenses have all trended in the wrong direction since 2021, and I am determined to help people in any way I can."

Crouch is vying for votes in an unusually competitive Republican primary that includes U.S. Sen. Mike Braun, Fort Wayne businessman Eric Doden, former Attorney General Curtis Hill and former Commerce Secretary Brad Chambers.

More: More than $5M flows into Indiana governor's race

Seven states in the nation have no individual income tax, according to the Tax Foundation; among states that have one, Indiana's is the fourth lowest, at 3.15%.

Still, it's the second largest source of tax revenue for the state, bringing in roughly $7.5 billion to $8 billion each year. These taxes help fund schools, infrastructure, public safety and clean air. Experts say cutting such a revenue source requires either shifting the tax burden elsewhere or cutting government services.

Crouch said she would accomplish this not by raising any other taxes on Hoosiers, but by cutting spending and limiting government growth. Her administration would create a commission to examine every government agency and department to identify where cuts could be made.

That would be a different commission from the one state lawmakers created this year out of Senate Bill 3. The State and Local Tax Review Task Force, which met for the first time Wednesday, is going to look at the state's overall tax structure, financial picture, debt obligations, and ways to eliminate the individual income tax, and deliver recommendations to the legislature by Dec. 1, 2024.

Ultimately it's the General Assembly that would approve any tax cut and lawmakers often have very different ideas than governors.

"I will keep my promise that this plan will deliver an overall tax cut for Hoosiers and I look forward to working with anyone who has effective ideas to successfully accomplish this win for Hoosiers," Crouch said.

She is also anticipating more revenue could come in from resulting economic growth, referring to studies that have concluded that a reduction in taxes by 1% of GDP leads to a 2-3% GDP growth over the next few years.

With no income tax, her campaign estimates the average Hoosier would save $1,500 to $2,000 a year.

Here's what other candidates think

Her opponents, while supportive of a low-tax environment, are largely skeptical of her plan, arguing that it's loose on specifics and runs the risk of depriving the state of crucial services.

Doden said he supports lowering taxes in a way that does not negatively impact schools, roads or public safety.

"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," he said.

While agreeing that the state should look at where to cut spending and reduce taxes, Hill said $7.5 billion is a "heavy lift" and may require making deep cuts to some programs, or shifting the tax burden onto other areas. He said Crouch's campaign pitch is "hard to take seriously" and seems like a hollow play to appeal to conservative voters.

"Until we see a real plan, it would seem to me like a campaign stunt," he told IndyStar. "It's easy to come out and say you're gonna cut taxes. The hard part is looking at Hoosiers and saying, here's what you're gonna do without."

Braun addressed the concept, though not Crouch's specific proposal, in a meet-and-greet with reporters on Tuesday, expressing an openness to studying it but saying he would have to answer some essential questions first, such as: How does one replace the $8 billion gap? Would the government still be able to deliver services, such as preventative health care that can curb costs down the road? How has cutting income taxes worked in other states?

"I want to make sure it is real value," he said. "That's what you need to look at if you're analyzing things correctly: how much you're spending, how much value are you creating."

Through a spokesperson, Chambers declined to comment.

In a statement, Libertarian candidate Donald Rainwater pointed out that he has been calling for the abolishment of the state income tax since 2016.

"I am glad that members of the Indiana General Assembly and candidates like Lt. Gov. Crouch are beginning to talk about an issue that I have been championing since 2016 and unashamedly promoted during the 2020 governor's race," he said. "I challenge every declared candidate for governor in 2024 to not only commit to abolishing Indiana's state income tax, but to also sign the Americans for Tax Reform Taxpayer Protection Pledge."

Encouraged by robust state revenues ― Indiana has a healthy $3 billion in reserves ― at least 21 state governments made cuts to income taxes in 2021 and 2022.

The Indiana primary election is May 7, 2024.

Contact IndyStar state government and politics reporter Kayla Dwyer at kdwyer@indystar.com or follow her on Twitter @kayla_dwyer17.

This article originally appeared on Indianapolis Star: Indiana governor's race: Suzanne Crouch pitches axing state income tax