INDIANAPOLIS – Senate Republicans unveiled a state budget Thursday that would include a small income tax cut, more transportation funding and $330 million in new dollars for Indiana schools.
Gov. Mike Pence has sought a 10 percent income tax cut over two years, dropping the individual rate from 3.4 percent to 3.06 percent.
Instead, Sen. Luke Kenley, R-Noblesville, crafted a two-year spending plan that includes reducing the individual income tax rate from 3.4 percent to 3.3 percent beginning Jan. 1.
The budget also would completely repeal the state inheritance tax rather than a nine-year phase-out currently in place.
Those two moves would provide about $450 million in tax relief to Hoosiers over the next two years.
In comparison, the House Republican version of the budget included no income tax cut and accelerated the inheritance tax cut elimination slightly from current law.
Overall the Senate budget would spend $29.5 billion over the two years; and it would have reserves at the end of fiscal year 2015 of $1.5 billion.
But Kenley also set up separate health care and transportation accounts to start saving for significant road projects and a possible expansion of state-provided health care insurance to more of Indiana’s poor.
In addition, the Senate budget would send an additional $112 million a year to INDOT and $101 million a year to local roads.
Local units will only receive the increased distribution if they have a local wheel/excise tax. Only 47 counties currently impose this tax.
Indiana’s schools would see a 2 percent increase in funding the first year and a 1 percent increase in funding the second year under the plan.
The budget is expected to be approved by the Senate Appropriations Committee this morning. Ultimately, a final version will be hammered out between House and Senate Republicans and Pence in the final days of the session.