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2016 Indiana General Assembly

Indiana House OKs cigarette, gas tax hikes to pay for roads

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The Indiana State Capitol in Indianapolis.

INDIANAPOLIS — The Republican-controlled House wagered Tuesday that Hoosiers are willing to pay slightly more for cigarettes and gasoline to raise $500 million a year in new, ongoing funding for state and local road and bridge improvements.

House Bill 1001, sponsored by state Rep. Ed Soliday, R-Valparaiso, was approved 61-36, with all but eight Republicans voting for the measure — the top priority on the House GOP legislative agenda. All Democrats were opposed.

"We have a real problem. How we got here doesn't matter. How are we going to move forward?" Soliday said. "This bill has had a lot of work, and people on both sides of the aisle worked together to get here."

The legislation increases the state's cigarette tax by $1 per pack and dedicates that revenue to state health care costs attributed to smoking-related illness, freeing up funds for road construction that currently are spent on health.

It also restores the buying power of Indiana's 18 cents per gallon gasoline tax to 2002 levels by adding approximately 4 cents per gallon and automatically adjusting the future gas tax rate for inflation.

In addition, the measure reduces the state personal income tax rate from 3.23 percent in 2017 to 3.06 percent by 2025, returning $85 to a Hoosier earning $50,000 a year.

Soliday said he's "not even remotely" concerned about the reaction from tax hike opponents, including Republican Gov. Mike Pence and various anti-tax interest groups such as Americans for Prosperity.

He said Hoosiers are willing to support tax increases if they know the money is being used appropriately for genuine state needs.

"It's our responsibility to lead," Soliday said.

"We're being very specific where the money is going to be spent; we're being very conservative in how it will be spent, and 22 states have passed adjustments to the gasoline tax and those aren't all liberal states."

House Democrats argued Indiana would have more than enough money for roads if Republicans hadn't given away billions of dollars in tax cuts in recent years.

The legislation now goes to the Republican-controlled Senate, which is sending the House Senate Bills 333 and 67 — two short-term road funding plans, endorsed by Pence, that rely on $1.4 billion in surplus and borrowed funds to patch up state and local roads through 2020.

Lawmakers are expected to continue haggling over the details in the month ahead, but likely will settle on a compromise road funding plan shortly before the General Assembly adjourns for the year in mid-March.

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