INDIANAPOLIS | Despite polls showing Hoosiers want Indiana to invest more in education, roads and other state services, the Republican-controlled General Assembly is poised to enact the largest package of tax cuts in state history.
Lawmakers will vote Friday on a 2014-15 budget plan, contained in House Bill 1001, that reduces the personal income tax rate to 3.3 percent from 3.4 percent, eliminates the inheritance tax, shaves 1 percent off the corporate income tax rate and cuts taxes on banks.
Altogether the tax cuts will pull $1.1 billion from state coffers and return it to Hoosiers.
"We believe these tax cuts are responsible and will have a positive impact on every Hoosier taxpayer and provide a meaningful boost for the Hoosier economy," said Senate President David Long, R-Fort Wayne.
Republican Gov. Mike Pence called the tax cut plan "a great victory," even though it fails to fulfill his campaign promise to cut the individual income tax rate to 3.06 percent, a 10 percent reduction.
The budget plan calls for the income tax rate to drop again to 3.23 percent in 2017, which would be a 5 percent cut from the current rate, but the Senate budget chief, state Sen. Luke Kenley, R-Noblesville, said lawmakers will decide in 2015 whether to follow through on that second income tax cut.
House Democratic leader Scott Pelath, D-Michigan City, said the proposed tax cuts won't make a difference in the lives of most Hoosiers and the Republican failure to invest more in the state's future will "keep Indiana stuck."
"They've got the worst of both worlds — they're going to learn to live without revenue that could help the middle class, and given that they've gone the tax cut route, they don't have enough to make a real middle class impact in terms of what goes in their pocketbooks," Pelath said.
A Hoosier family earning $50,000 a year would pay $50 less in income taxes once the rate cut takes effect Jan. 1, 2015.
The spending side of the budget nearly matches the inflation-only plans separately approved earlier this year by the House and Senate.
Funding for elementary and high school education would increase 2 percent during the 2014 budget year, which starts July 1, 2013, and an additional 1 percent in 2015, with $34 million set aside for teacher performance pay and $20 million for school safety grants.
On transportation, approximately $210 million a year in new, additional money would be made available by dedicating 1 percent of state sales tax revenue to roads and fully using gas tax revenue for infrastructure, instead of diverting some of it to state police and other agencies.
The money would be split with 53 percent going to support state roads and 47 percent to local roads. Counties would not be required to enact a wheel tax or any other tax to gain access to the transportation money.
An additional $200 million a year would be put in a Major Moves 2020 fund to spend on future large-scale road projects, such as widening Interstate 65 to six lanes across the entire state.
The budget plan sets aside $250 million for unexpected costs to implement the Affordable Care Act, but does not spend any money to expand Medicaid for the 400,000 Hoosiers set to become eligible in 2014.
It does, however, authorize Pence to ask the federal government to give the state all of the money it spends on Indiana Medicaid for the state to create its own health plan. Pence has refused to expand Medicaid eligibility.
Other provisions in the budget include $100 million for adult education and workforce training programs, a $35 million increase for the Department of Child Services to fund additional caseworkers and child abuse hotline improvements and $500,000 for a study of the need for a trauma hospital in Gary.