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Indiana budget deal calls for 5% income tax cut

INDIANAPOLIS – Indiana’s individual income tax rate will drop 5 percent starting in 2015 under a state budget deal announced Thursday.

The rate will first fall from 3.4 percent to 3.3 percent in 2015. Then it will decrease again to 3.23 percent in 2017.

In addition, the agreement calls for a retroactive repeal of the state inheritance tax effective Jan. 1, 2013, and a reduction in the financial institutions tax.

A phase-down of the corporate tax also continues.

“We believe this blend is the right blend, at the right amounts, at the right time to be sustainable for the future,” GOP House Speaker Brian Bosma said.

The full budget compromise could be available online by 5 p.m. today with a vote coming Friday.

Gov. Mike Pence said, “today Hoosier taxpayers won a great victory. The agreement reached between our administration and legislative leaders will be the largest state tax cut in Indiana history. The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms.

“I am grateful for the leadership of Senate President Pro Tem David Long, Speaker Brian Bosma and other key fiscal leaders for working diligently with our administration to craft this historic package of tax relief. Their efforts demonstrate the commitment of the General Assembly to put taxpayers first.”

Bosma said the bill also provides about $200 million more in annual transportation funding and returns education funding to pre-recession levels.

Schools on average will receive a 2 percent increase in funding through the tuition support formula in the first year and 1 percent – which is below inflation – in the second year.