U.S. Markets open in 3 hrs 1 min

Ind. panel advances $30B budget on partisan vote

Tom Lobianco, Associated Press

INDIANAPOLIS (AP) -- A pair of Republican senators argued Tuesday for the personal income tax cut that Indiana Gov. Mike Pence has made his top priority, while House Republicans across the hall advanced a budget that swaps that cut for education and roads spending.

The House Ways and Means Committee voted 16-7 along party lines to send a $30 billion budget to the House of Representatives. The Senate Tax and Fiscal Policy Committee, meanwhile, vetted Pence's proposal to cut the income tax by 10 percent, but declined to vote on it.

At the center of the debate is how lawmakers will spend a roughly $500 million annual surplus left by former Gov. Mitch Daniels.

Pence campaigned heavily on the tax cut, which would cost roughly $500 million a year once phased in. House Republicans, led by Speaker Brian Bosma, have said the state needs to restore funding cut during the recession. Democratic lawmakers have pointed out that Daniels left the state with many debts, including a $2 billion unemployment insurance loan from the federal government.

"We would unleash half a billion dollars into the economy. Our taxpayers can make wiser economic decisions than the government can," said Sen. Mike Delph, R-Carmel, lead author of the Pence measure in the Senate.

But skeptical budget leaders in the House and Senate have either dismissed the cut, or have been slow to embrace it, saying they would like to wait until they get new tax collection forecasts in April before signing off on the measure.

Senate Tax and Fiscal Policy Chairman Brandt Hershman, R-Buck Creek, asked Delph and the author of a similar tax cut, Sen. Jim Buck, R-Kokomo, if the state was being forced to cut because the federal government is allowing taxes to increase.

"The question is: 'Are we doing so at a cost to our own state services because the federal government can't get its act together?'" asked Hershman.

For his part, Pence has dug in on his signature tax cut and said again this week that he is "disappointed" in the House GOP changes. The Republican governor has not ruled out any alternatives to his plan.

"We're really focused on our proposal right now. I think it's essential that as this budget process moves forward that lowering the marginal income tax rate by 10 percent be a part of the process," he said. "I was very disappointed, with record budget surpluses, that the House budget did not include one cent of new tax relief for Hoosiers. I think we can do better."

Members of the House budget panel made a few tweaks to the Republican budget plan, but largely kept it the same. They signed off on $500,000 more for the Clean Water Indiana Program and added $7 million for education, while cutting funding for a program former Gov. Robert Orr built to reduce class sizes.

The House plan spends roughly $200 million more on education than what Pence had sought. It also funnels $500 million to the state's transportation fund by no longer diverting the gas tax to the State Police, Bureau of Motor Vehicles and elsewhere.

The proposal now moves to the House where Democrats hope to force a vote on Pence's tax cut as well as an alternative budget they're crafting.