Mike Pence (WIBC.com photo: Eric Berman)

Republican gubernatorial nominee Mike Pence is proposing a 10-percent income tax cut.

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Pence wants to trim Indiana's tax rate to 3.06 percent. That would be the lowest since the current rate of 3.4 was adopted in 1987. The Sixth District congressman argues the cut would give an economic boost not only to families, but to businesses. He says nine out of 10 Hoosier businesses file their taxes under the individual income tax, not the corporate tax.

The Tax Foundation calculates Hoosiers' total tax burden as the 26th-lowest in the U.S.. The tax cut would push Indiana to the 21st-lowest. The state's taxes would remain the third-lowest in the Midwest, behind South Dakota and Missouri, but would move a hair lower than neighboring Kentucky.

Pence calculates the tax cut would chew up about two-thirds of projected surpluses the next two years. Rather than spending the remainder, he says he'd add it to the state's reserves as a safeguard against a double-dip recession. He says he expects to talk with legislators about spending priorities, but says his inclination is to limit spending increases to about 1.4 percent which is double the current rate of growth.

Pence says he has no plans to repeal the automatic tax rebate passed by Governor Daniels. That means if the state's reserves hit 15-percent of spending as Pence projects, taxpayers would receive an additional $200 million rebate to bring that figure down to 12.5 percent.

Democratic nominee John Gregg has already unveiled his own tax cut plan, eliminating the state sales tax on gasoline. He says the typical family of four would receive at least $33 a year more than Pence's estimated $228 savings, and might save more than $500.