Senate budget includes partial income tax cut, road money

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There's a new proposal to save Hoosiers money, but some are questioning the cost.

The Indiana state Senate wants to give you a three-percent income tax cut. That's just a fraction of the ten-percent drop proposed by Governor Mike Pence.

Senate Republicans want to use the remaining money to pay for bigger highways. $200 million would be used to add an extra lane to Interstates 65 and 70. It would also pay for building a new bypass around Indianapolis.

The Senate Appropriations Committee advanced the budget on a 9-4 party line vote Thursday.

Eyewitness News met Jack Rutledge as he was emerging from Marsh Supermarket in downtown Indianapolis. The ten-percent or three-percent debate means a lot to him.

"In percentages, ten percent of course. Exactly - because it's expensive buying groceries today," he said.

Pence wants a ten-percent income tax cut. The House didn't offer any increase but Thursday the Senate stepped up with a compromise of three percent.

"If you look at the numbers it is close to what the governors' cut would achieve. We think this is a broader approach and maybe a better one. We are not disagreeing that the income tax cut should be part of the package. We think including other tax cuts is the way go to," said Senate President David Long (R-Fort Wayne).

The Senate included an elimination of the inheritance tax and a lowering of the corporate tax rate.

So what is the difference? 

A ten-percent cut in the income tax would on average save you $230 a year, roughly $520 million total.

A three-percent cut would save you around $70 or $150 million total.

Back to Jack Rutledge who is now packing his groceries in the truck of his car.

"It's money and everything is costing more and this is important," he said.

It certainly is to Governor Mike Pence who called this compromise a good start.

"I am encouraged but not satisfied and I look forward to vigorous and respectful discussions in the weeks ahead," Pence said at a news conference Friday.

That means the governor has not given up yet on getting what he wants.

The budget does include an increase in funding for K-12 education and for infrastructure in Indiana.

It might seem like lawmakers are splitting hairs. It only amounts to a difference of $160 on average but to a taxpayer like Jack Rutledge that means a lot.

"Money in my pocket means I am going to shop and if it's ten percent, I will be probably be spending that money. The difference between the three and the ten will generate more money into the community," he said.

The governor also hopes it will create jobs.

The next opportunity for compromise is April 17th. That is when the state's revenue forecast will be released.


For schools, the budget calls for a two-percent increase in funding for 2014 and a one-percent increase in 2015. It adds $10 million a year for "school resource officers."

Pence says Indiana is the only state proposing the presence of an armed public safety officer in every school, and argued that the plan would contribute to school safety.

See full details on the proposal.

See Sen. Luke Kenley's presentation.