Senate Republicans offer smaller cut to income tax as compromise to Gov. Mike Pence
Pence wanted 10 percent reduction
Last Updated: 250 days ago
INDIANAPOLIS - The Indiana Senate is advancing a new two-year, $30 billion budget that matches the education funding increases already approved by the House and sets extra money aside to eventually expand the state’s highways.
It includes an individual income tax reduction worth $150 million statewide and around $25 for the average Hoosier – shy of the $520 million total income tax cut that Gov. Mike Pence wants, but better news for the governor than nothing, which is what the House passed.
“It is a nod to Gov. Pence, but also something we agreed with him on – that this does make sense,” said Senate President Pro Tem David Long, R-Fort Wayne.
Pence has proposed lowering Indiana’s 3.4 percent individual income tax rate to 3.06 percent. The House’s budget kept that rate flat at 3.4 percent, and the Senate’s budget, unveiled Thursday, would lower it to 3.3 percent.
“We’re obviously comfortable with this number,” Long said.
The Senate’s budget also would eliminate Indiana’s $150 million annual inheritance tax, which is already being phased out between now and 2022. And it would lower a financial institutions tax that would cost state and local governments $36 million per year.
Democrats complained that the tax cuts – the income tax reduction, in particular – take away money that should be spent on education and health services.
“If it weren’t so serious, it would be a joke,” said Sen. Lindel Hume, D-Princeton.
He said an individual who earns $50,000 per year would save just $50 over the year, which amounts to “less than $1 a week.”
“It’s just wrong for us to do that. Most of the people in this state could care less about that dollar a week, and we seriously need that money to fund this state,” Hume said.
He said Indiana should instead pump that money into public schools – “where we have over the last few years reduced the funding for education and then we criticize the schools, and it’s a constant need.”
Some Republicans, meanwhile, praised the tax cuts included in the budget.
“It’s a responsible budget. We are keeping as much money as possible in the hands of the people who are earning it,” said Sen. Brent Waltz, R-Greenwood.
The Senate’s budget increases roads funding by $112 million annually for the Indiana Department of
Transportation and another $101 million for municipalities – as long as those municipalities have enacted wheel taxes.
“There does need to be skin in the game,” Long said. “There is a method for helping yourself – the wheel tax. We think if the state invests, so should the locals.”
It also sets aside $200 million per year to go into a new “Major Moves 2020” fund. That fund would eventually be tapped to finish the 142-mile Interstate 69 extension, as well as add a third lane each way to Interstate 65 and Interstate 70 and build the “Indiana Commerce Connector,” a proposed tolled loop around the southeast side of Indianapolis.
The Senate’s budget maintains the House’s K-12 education funding increases of 2 percent in its first year and another 1 percent in its second year. However, some of that money – particularly in the second year – is tied to performance measures.
It also sets aside $494 million in its first year and $614 million in its second year in case Indiana opts to pursue the Medicaid expansion envisioned in the federal health care law.
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