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Budget includes tax cut, more school, road funds

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Gov. Mike Pence and Indiana's Republican legislative leaders have reached a budget deal that increases spending on roads and schools while giving the governor a piece of the income tax cut he has arduously sought this session.

House and Senate leaders unveiled a budget plan Thursday that cuts the personal income tax 5 percent over the next four years and eliminates the inheritance tax. It spends roughly $330 million more on education over the next two years, increasing 2 percent in the first year of the budget and 1 percent in the second. It also increases spending on state and local roads by $400 million and invests another $400 million for major highway expansions over the biennium.

House Speaker Brian Bosma, R-Indianapolis, said his priorities had always been that the state's budget be strong enough to avoid big spending cuts or the need for tax increases in the future.

"We believe this blend is the right blend, it's at the right amount, it's at the right time to be sustainable for the future," Bosma said.

After months of taking a hard-line stance seeking a 10 percent tax cut, the budget deal marks a stark compromise for Pence and his supporters. The new plan gives him half the cut he was seeking and takes twice as long to take effect, but is also supplemented with other tax cuts he had not sought.

But Pence, Bosma and Senate President Pro Tem David Long, R-Fort Wayne, quickly rallied around their compromise plan Thursday.

"The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms," Pence said in a statement.

Democrats have criticized the overall push from Republicans to cut more taxes while not restoring all of the education spending cut in previous budgets. But Republicans greatly outnumber Democrats in both the House and Senate.

The tax cut package includes $150 million for the elimination of the inheritance tax and more than $250 million annually once the income tax cut is complete in 2017, a package Republicans called the largest the state has ever seen. House Democratic spokesman John Schorg quickly pointed out that a string of cuts in 1997, 1999, 2002, 2007 and 2008 were all approved when Democrats led the House.

The budget also spends $128 million to pay off state debt incurred building the State Museum and the Forensics and Health Sciences Lab. It includes $206 million to pay for university projects with cash instead of bonds and spends roughly $100 million on job-training plans pushed by the governor and lawmakers.

It also includes more than $12 million to pay off loans incurred by charter schools that were deemed "failing" by the state, but leaves the question of whether their loans will be absolved with the Pence administration.

The budget compromise represents the biggest breakthrough for lawmakers as they work through the final hours of their 2013 session. Other issues still being worked out Thursday afternoon included proposals to expand vouchers, review the state's inclusion in national Common Core standards, mandate a regulatory review of the $2.8 billion Rockport coal gasification plant and possibly expand gambling.

As minority Democrats began objecting to compromise measures, Republican leaders pulled them from conference committees and replaced them with Republicans. The procedural moves, which guarantee legislative leaders win support they need, are common and were previously done by Democrats when they controlled the House.

Lawmakers are hoping to finish their 2013 session Friday.

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  • Agreed
    I too am a small business owner, and I don't believe the 5% income tax reduction is anything more than policitical window dressing for Pence. I do like the elimination of the inheritance tax, since I've seen a number of family farm clients have to take out huge loans against the value of their legacy, the farm, to pay the tax. Which, by the way is double taxation, since someone in the family already paid tax on the income they used to buy the land in the first place. But I think Bosma is a smart guy and decided to throw Pence a bone. I voted for Pence and I'm beginning to regret it, except for the fact that the other guy was far more unimpressive. Pence is starting to remind me of Dan Quayle -- nice looking fellow, but if his brains were lard, I don't believe he'd grease too big of a pan...
  • Not Buying The Hype II
    I'm a business owner and a 0.17% tax cut is not going to induce my hiring another employee, nor will it cause me to expand my business. Anyone that thinks this tax cut will have a trickle down effects has obviously never run any type of business. Ever wonder why they teach this type of economics in a Master's of Public Administration course, but not in a Master's of Business Administration?
  • Not Buying The Hype
    Scott, the sentiment of many is this tax decrease was unnecessary and was nothing more than a Mike Pence resume builder. I've yet to talk with anyone that thinks our state income tax is burdensome. Most open minded individuals fully understand and accept the fact it takes a certain amount of revenue to provide the government services we feel are appropriate. Most of us feel that having good roads, schools, services, parks, etc are worth more than $85-$400/year. Blatant political partisanship doesn't move this state forward.
  • Great News!
    This is good news for Indiana taxpayers. Sure, many would like to discount the 5% decrease in personal income tax as insignificant, and if you consider it from a per-taxpayer basis, there might be an argument there. However, based on 2009 tax receipts for the state, personal income tax comprised 36.6% of total receipts, and since total tax revenue for 2012 (in which tax receipt records were set nationwide) was $15.705B, that means this change will result in nearly $290 million in the pockets of consumers that otherwise would have been squandered (or spent, depending on your viewpoint) by the state. $290M will equate to a significant amount of spending (sales taxes), jobs (income taxes) and other economic activity that will likely easily make up for the revenue lost through the tax cut, add in that personal income tax growth for the last couple years more than covers the cost, what's the real objection? That still is still going to end up with more money. Taxpayers will end up with more money. It's great news!
  • I'll Give You $85, If You Use It To Buy Asphalt
    Paul, I'll make a deal with you, as long as you use your $85 and my $85 to buy asphalt to patch the crappy roads, I'll gladly throw in an extra $25 so you have a little pocket money. Show us all how efficient and productive you are and you may have a new career. But, if you are just going to blow your $85 on new shoes or let it sit in your bank account, then you are welcome to stay off our roads, and you can keep all the money you like.
  • Yawn
    I'm pretty conservative on tax matters and am glad the inheritance tax is going away since it's essentially state-sanctioned theft, but the income tax reduction is meaningless. I would much rather the difference go to state infrastructure.
  • Meaningless
    Even to the fortunate ones who will receive a $400 or $500 benefit; .17% just isn't impact at any level. Now Pence can tout that he lowered taxes when he runs for president. That is what this is all about. The lifelong politician is always campaigning.
  • Politics over logic
    A symbolic tribute to the governor's tea party supporters. The benefit to the average earner will be minimal, maybe 5-10 bucks a month. Why don't we use the cash to shore up public retirement funds, give a raise to teachers, fix roads, improve transit, etc?
  • Income Tax
    What a lousy deal! Why not use the $$ to shore up retirement liabilities and state infrastructure. The real beneficiaries will be wealthy people, and they don't need the money anyway.
  • My Money
    If you don't want the $85 dollars that you earned, please give it to me. As much as governments waste, it is better in my hands than them.
    • This is of limited benefit to the people
      The state tax rate is 3.4% A 5% reduction is equal to .17%. Someone making $50k/yr would save $85/yr in taxes. $85 is $85, but this make only the most marginal impact to the individual. Conversely, the State could have used this money to fix some of the roads and bridges, or something else that would benefit the masses. Individually, it's insignificant and will go practically unnoticed during the upcoming tax filing season. Collectively though, it could have done a lot of good for the State (and therefore its people). Classic example of a move based more on politics than economics or common sense.

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