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Size of Indiana income tax cut remains undecided

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Indiana's new state budget will include at least a small personal income tax cut, although legislative leaders said Wednesday they weren't certain whether it will be as large as Republican Gov. Mike Pence wants.

Negotiations were continuing between House and Senate leaders on the new two-year state budget and other issues, including a proposed expansion of the state's private school voucher program, ahead of Friday's planned adjournment of this year's legislative session.

Republican House Speaker Brian Bosma said negotiations were continuing with the Senate and the governor's office on the size of the cut.

Pence has sought a 10-percent cut in the individual income tax rate, which would reduce that rate from 3.4 percent to 3.06 percent and cost about $500 million a year. The House didn't include an income tax cut when it approved a budget plan in February, while the Senate this month backed a 3-percent cut.

Bosma said the budget deal would include an income tax cut, but the size was "still under discussion."

Pence said last week he would consider supporting phasing in his proposed income tax cut over a few years but that he didn't want to budge on its size.

Senate Majority Leader Brandt Hershman, R-Lafayette, said a decision had not been made on whether legislators would move closer to Pence's proposal.

"I don't think anything is off the table yet," Hershman said.

Bosma said he expected the new budget would have $500 million a year in tax cuts. That includes about $150 million from speeding up the phase-out of the state inheritance tax approved last year and $200 million from a corporate income tax reduction approved in 2011.

The spending plan will likely give 2-percent and 1-percent increases for school funding over the next two years, for about a $330 million hike.

Rep. Greg Porter, the top Democrat on the House Ways and Means Committee, said the Republicans have misplaced priorities and should do more to make up for spending cuts made by former Gov. Mitch Daniels during the recession.

"We should restore the dollars that we've taken away over the last two to four years," said Porter, D-Indianapolis. "We should restore $300 million back to public education, restore the $100 million back to the Department of Child Services that we've taken away."

House and Senate education leaders said they were also close Wednesday to agreeing on expanding the state's private school voucher program by making children who would attend poorly performing schools immediately eligible.

The current voucher law requires all students to spend at least one year in public schools before becoming eligible if their families meet income limits.

Senate Education Committee Chairman Dennis Kruse, R-Auburn, said the compromise would make students whose public school received a state performance grade of F immediately eligible.

Nearly 150 schools across the state received an F in scores released in November, but it's unclear how many students could become eligible and how much more that could cost the state.

The House-approved bill would have eliminated the one-year public school rule for children entering kindergarten anywhere in the state, after which they could remain a voucher student in private schools.

The voucher program was first approved in 2011. The state is spending about $37 million for vouchers to some 9,100 students this school year.

"I think it is better to have incremental growth rather than explosive growth," Kruse said. "I think it's wiser for us to take small steps and see how each step affects the system overall."

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  1. The deductible is entirely paid by the POWER account. No one ever has to contribute more than $25/month into the POWER account and it is often less. The only cost not paid out of the POWER account is the ER copay ($8-25) for non-emergent use of the ER. And under HIP 2.0, if a member calls the toll-free, 24 hour nurse line, and the nurse tells them to go to the ER, the copay is waived. It's also waived if the member is admitted to the hospital. Honestly, although it is certainly not "free" - I think Indiana has created a decent plan for the currently uninsured. Also consider that if a member obtains preventive care, she can lower her monthly contribution for the next year. Non-profits may pay up to 75% of the contribution on behalf of the member, and the member's employer may pay up to 50% of the contribution.

  2. I wonder if the governor could multi-task and talk to CMS about helping Indiana get our state based exchange going so Hoosiers don't lose subsidy if the court decision holds. One option I've seen is for states to contract with healthcare.gov. Or maybe Indiana isn't really interested in healthcare insurance coverage for Hoosiers.

  3. So, how much did either of YOU contribute? HGH Thank you Mr. Ozdemir for your investments in this city and your contribution to the arts.

  4. So heres brilliant planning for you...build a $30 M sports complex with tax dollars, yet send all the hotel tax revenue to Carmel and Fishers. Westfield will unlikely never see a payback but the hotel "centers" of Carmel and Fishers will get rich. Lousy strategy Andy Cook!

  5. AlanB, this is how it works...A corporate welfare queen makes a tiny contribution to the arts and gets tons of positive media from outlets like the IBJ. In turn, they are more easily to get their 10s of millions of dollars of corporate welfare (ironically from the same people who are against welfare for humans).

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