Gov. Daniels signs Indiana inheritance tax phase-out bill

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Governor Mitch Daniels signed bills Tuesday to phase out Indiana's inheritance tax and pay for full-day kindergarten.

The phase-out plan approved by legislators this month will decrease the inheritance tax in stages starting next year until it is eliminated after 2021. The inheritance tax law would increase from $100,000 to $250,000 the amount not subject to the tax for immediate family, and then it would reduce the tax levy by 10 percentage points annually until the tax is gone.

"Never again, we hope, will a farm or small business change hands because of the inheritance tax," Daniels said before signing the measure.

State fiscal analysts expect the rollback will end up costing the state $165 million by 2024, but lawmakers who signed off on the measure said the hit would be offset in large part by an agreement to begin taxing online retailer in 2014.

The kindergarten bill that Daniels signed calls for about $80 million to cover additional costs associated with full-day kindergarten. The money would be available to schools for one year and would have to be approved again during next year's crafting of the biennial budget, although Daniels said he is confident they will continue to pay for the schooling.

"They better!" he said.

The measure also prohibits districts from charging special kindergarten fees.

In addition to these bills, Daniels approved a requirement that the state hold more money in reserves before an automatic tax refund kicks in. The refund will send half of all reserves above a 10 percent savings threshold back to taxpayers. Starting next year, that threshold would increase to 12.5 percent of state spending before the money is returned.

Daniels on Tuesday delivered new estimates that the 3.3 million Indiana residents who filed tax returns will receive $70 if the state maintains an expected cash reserve of $1.8 billion.

That $1.8 billion in state savings can be attributed to three things: improvements in tax collections as the economy has improved, deep cuts made throughout the 2011 budget year by the Daniels administration and a budgeting error that added $320 million to the state's books.

Daniels also signed a measure giving $6 million more to victims of last summer's deadly state fair stage collapse.

As for a measure that would allow residents to use force when resisting police in some cases, Daniels said he's still unsure whether he will approve it.

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