By Lesley Weidenbener
TheStatehouseFile.com

Lesley Weidenbener, managing editor, TheStatehouseFile.com

INDIANAPOLIS – When Indiana lawmakers voted this spring to reduce the corporate income tax rate, they were joining hundreds of other legislators across the nation considering tax cuts.

But history shows these tax cut splurges can cause significant problems for states when their economies go south – leaving policy makers to face much tougher decisions about increasing revenue or reducing services.

At least 30 state legislatures have considered or are still considering tax bills this year – and most of them would reduce revenue, according to Stateline.org, a nonprofit website that tracks state policy. Only a few states are considering tax hikes.

The moves are the product, in part, of an improving economy that has reduced unemployment and bolstered state revenues – at least over the past few years. According to the U.S. Census Bureau, state revenues have grown for 16 straight quarters through the end of 2013.

But some of these tax cuts are also about competition. There is a war among states to offer corporations the cheapest environment in which they can do business.

It’s the new economic development model. Rather than offering an enormous package of incentives meant to lure a specific company that’s offering thousands of jobs, states are competing to be the place where every firm – large and small – wants to do business.

The goal is to bolster tax revenue by increasing the number of taxpayers. The idea has merit in theory. A broader, more diverse tax base is a stabilizing factor during a recession. But the race to lure business development is just that – a race. No state is standing still.

Gov. Mike Pence boasted that when Indiana’s new tax cut is fully implemented, the state will have the second lowest corporate rate in the nation. But there’s little chance that will actually be true.

That’s because the move by Indiana to reduce its income tax on businesses will likely spur other states to do so as well. Already this spring, New York lawmakers have approved a corporate tax cut – although its rate will not fall as far as Indiana’s. Wisconsin has passed corporate tax reforms and other states are considering whether to make changes as well.

And certainly, if Indiana is successful in attracting firms from other states throughout the next few years, those places are certain to react.

But there’s another problem with focusing on tax cuts. Reduced revenue puts funding for government services in jeopardy. And ironically, business leaders – the ones who are making the decisions about where to locate – care a lot about government services. Corporate execs don’t want to locate to areas without good schools, medical care and cultural amenities.

In fact, it’s big business that is clamoring for better mass transit in Central Indiana. It’s the Indiana Chamber of Commerce fighting for pre-kindergarten programs that could eventually cost the state some $250 million annually. Business leaders are looking for a progressive approach to building culturally conscious communities that keep young college grads from escaping to the coasts.

But if Indiana policy makers look back at their own history, they’ll see that some of their past tax cutting sprees left them vulnerable. When former Democratic Gov. Evan Bayh left office in 1997, the state boasted a huge budget surplus – much bigger than today’s when considered as a percentage of total spending.

But lawmakers frittered much of it away with a series of tax cuts meant to give some kind of reduction to almost everyone in the state. They realized later that the benefits were spread so widely that no one person noticed that big of a break. And when the next recession came along, the state was unprepared to weather it without cuts to schools and state services.

The situation was so serious in 2005 that when then-Republican Gov. Mitch Daniels took office, he proposed a temporary tax increase – one that lawmakers rejected. Eventually, Daniels and lawmakers brought the state’s finances under control – just in time for another recession, the largest since the Great Depression.

We’re now just a few years removed from that financial debacle and lawmakers in Indiana and other states appear to have caught the tax cut fever again. They should consider history before they get carried away.

Lesley Weidenbener is executive editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.

By John Krull
TheStatehouseFile.com 

INDIANAPOLIS – Nearly 30 years ago, I spotted David Letterman at a store in Indianapolis.

It was when he was still on the climb – back before the move to CBS, before his epic (and losing) battle with Jay Leno to succeed

John Krull, publisher, TheStatehouseFile.com

Johnny Carson on “The Tonight Show,” back when he was the brash young troublemaker who wasn’t happy unless he was kicking television’s fourth wall down.

I’d liked his humor from the beginning, the mockery and self-mockery he used to deflate pomposities, including his own. The whole premise of his programs, after all, was that they were television shows and shouldn’t be taken too seriously.

Three decades later, I still laugh at a running joke he rolled out about Walter Mondale, Jimmy Carter’s vice president and the 1984 Democratic presidential candidate. In person, Mondale is bright and charming, but on TV he generated an excitement level that registered somewhere between porridge and oatmeal.

Letterman said that was because people didn’t know the real Mondale, who had a fascinating history. Then, taking a riff from the old Johnny Cash song, he said that Mondale once had “shot a man in Reno just to watch him die.”

The whole idea was so absurd – and so funny. I laughed until I rolled off the sofa.

For at least a week after that, every time Letterman made reference to Mondale, he said, “you know, the presidential candidate who shot a man in Reno just to watch him die.”

Every time, it cracked me up. In just a few words, Letterman managed to puncture not just Mondale’s placid dullness but that of the blow-dried and carefully coiffed political world itself – and give a hint of the endless and surreal scrambling just below the settled surface.

And there, three decades ago, Letterman was at a small shop in Broad Ripple, not far from where he grew up and went to high school. He was with his then-girlfriend and writing partner Merrill Markoe.

I thought about going over to introduce myself and tell him how much I enjoyed his show, but something stopped me.

He and Markoe clearly were in the middle of a spat. They weren’t loud about it or undignified in any way, but all the signs were there. They were leaning in close and talking in hushed tones. Their brows were furrowed, their shoulders tensed and their lips pursed. Markoe kept tapping Letterman’s forearm with her forefinger, almost as if she were pounding out a drum solo.

Yup, they were having a fight.

Much as I wanted to go over and shake his hand and tell him that it was great to see a guy from Indiana doing so well, I couldn’t help but put myself in his position. I couldn’t help but think how difficult it would be to break off in the middle of an argument with your significant other to smile, shake hands and be gracious with a total stranger.

So I hung back. Minutes later, Letterman and Markoe left the store, still quietly bickering. They broke up not long after.

Flash forward to now. Just a few days ago, Letterman announced he would retire in 2015.

His announcement produced a well-deserved wave of tributes and accolades. He was lauded as a man who revolutionized late-night television and a broadcasting hall-of-famer.

At the heart of that success was the quality that prompted me to respect his space so he could have a fight with his girlfriend without interruption all those years ago – an ability to elicit empathy. We laughed at his jokes, forgave his missteps, worried over his health troubles and overlooked his occasional cantankerousness because he seemed like one of us, just another Hoosier with a sharp wit who happened to step onto the big stage.

I missed my chance to shake Letterman’s hand 30 years ago. If I had it again, I’d tell him the truth – that I still laugh occasionally at jokes he’s probably forgotten he even told.

And I’d tell David Letterman that, thanks to him, I’ll always think of Walter Mondale as the political candidate “who shot a man in Reno just to watch him die.”

John Krull is director of Franklin College’s Pulliam School of Journalism, host of “No Limits” WFYI 90.1 Indianapolis and publisher of TheStatehouseFile.com, a news website powered by Franklin College journalism students.