INDIANAPOLIS (AP) — Indiana Gov. Mike Pence and legislative
leaders reached a budget deal Thursday that will cut the state's personal
income tax rate by 5 percent over the next four years while giving small
increases to school funding.
The tax-cut plan would reduce the state's current 3.4 percent tax rate to
3.3 percent in 2015 and then reduce that to 3.23 percent in 2017.
Pence issued a statement calling the cut "a great victory" for taxpayers
even though it is half of what he proposed and is phased in over a much
Republican legislative leaders had resisted Pence's push for a 10 percent
tax cut to be fully implemented by July 2014. The House approved a budget
plan in February without an income tax cut and the Senate this month had
backed just a 3 percent cut.
Republican House Speaker Brian Bosma 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.
The Republican-dominated House and Senate are both expected to vote on the
two-year budget plan on Friday, which is expected to be the final day of
this year's legislative session.
The proposed budget also calls for repealing the state's inheritance tax
retroactive to Jan. 1 of this year, which will reduce state revenue by
about $150 million. Legislators last year had approved a 10-year phase out
of that tax.
The spending plan gives 2 percent and 1 percent increases for school
funding over the next two years, for about a $330 million hike.
Democrats have criticized the school funding increase as inadequate after
former Gov. Mitch Daniels cut some $300 million from school spending
during the recession.
The budget plan would also increase state funding for road and bridge
projects by $215 million a year.
Pence said in his statement that the tax cuts put the state's taxpayers
"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.