Thursday, April 25, 2013

Legislative Budget Deal Big Victory For Pence

It's not the 10% income tax cut he sought, but the budget deal Republican legislative leaders announced today gives Gov. Mike Pence a significant part of the tax reductions he sought. The plan announced today provides for a 5% reduction in state income taxes phased in over the next four years, but it immediately repeals the state's inheritance tax retroactive to January 1, a big boost to family-owned farms and small businesses. Planned reductions in the state's corporate tax rates will continue, along with similar tax cuts for financial institutions. Together, the tax reductions will save Indiana taxpayers $1.1 billion over four years. Gov. Pence wasted no time in declaring victory:
“Today Hoosier taxpayers won a great victory. The agreement reached between our administration and legislative leaders will be the largest state tax cut in Indiana history. 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. 
I am grateful for the leadership of Senate President Pro Tem David Long,  Speaker Brian Bosma and other key fiscal leaders for working diligently with our administration to craft this historic package of tax relief. Their efforts demonstrate the commitment of the General Assembly to put taxpayers first.”
This is quite a different place than Pence found himself in January when he first announced his tax cut plan. Legislative leaders scoffed at his original plan, but in the end, gave him part of the tax cuts he sought and additional cuts he didn't seek. Part of that change of heart was due to altered revenue projections showing the state taking in $290 million in higher revenues over the next two years than had originally been projected. According to the Star, the budget deal announced today includes the following spending highlights:
■$215 million per year increase for roadwork, plus $200 million per year for a reserve fund for future work.
■A 2 percent increase for K-12 education funding in 2014 and 1 percent in 2015, plus $30 million in additional money will be provided for high performing schools and $300 million to a tuition reserve fund .
■$70 million to pay back bonds at the Indiana State Museum, and $58 million for the Forensics and Healthy Science Labs.
■$206 million for new university projects and $66 million per year for university performance funding.
■$250 million to a reserve Medicaid contingency fund. It authorizes the governor to negotiate an expansion of Medicaid through the Healthy Indiana Plan or a similar model with the federal government.
■$35 million for additional caseworkers and hotline improvement at the Department of Child Services — $5 million more than the Senate had proposed.
■a $120 million annual surplus and a $2 billion reserve.

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