Indiana Senate to consider changing tax-refund plan

January 19, 2012

An Indiana Senate committee is advancing a plan to put more money into state savings accounts before automatic tax refunds go out to taxpayers.

The Senate Appropriations Committee voted Thursday to rework the state's automatic tax refund. Senate Appropriations Chairman Luke Kenley, R-Noblesville, says the state should sock away more money before it begins sending automatic tax refunds.

Kenley's plan would increase the point at which the tax refund is triggered based on an amount equal to 10 percent of the state's K-12 education spending. Because the state spends more than half of its budget on education it would effectively set the new tax refund trigger at roughly 15 percent of the state's annual spending.

Senators decided, however, to delay its start by at least a year, possibly allowing the automatic tax refund to kick in later this year. The measure must still clear approval by the full Senate and the House.

Lawmakers last year approved Gov. Mitch Daniels' plan to automatically send a portion of the state's savings back to taxpayers. Cash the state saves above 10 percent of its planned spending now is split evenly between the tax refund and a fund designed to pay down teacher pension liabilities.

Kenley's proposal would also send more money to the teacher's pension fund in some cases and set the tax refund to only kick in alternating years after lawmakers approve their biennial state budget.

Debate about what to do with the state's extra cash stems from the $1.8 billion the state recently estimated it would have at the close of the current budget. The rare, massive surplus grew out of improved tax collections and budget cuts last year coupled with the discovery the state was unknowingly sitting on $320 million in corporate tax collections.

The $1.8 billion would be enough to trigger the current automatic tax refund but would fall just shy of meeting the higher mark proposed by Kenley.

House lawmakers, meanwhile, are expected to take a first look next week at spending some of the state's surplus on victims of the Indiana State Fair stage collapse and further paying for full-day kindergarten.

House Ways and Means Committee Chairman Jeff Espich, R-Uniondale, said a spending plan could be introduced Monday or Tuesday.


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