Cigarette tax hike compromise part of House Republicans’ proposed budget

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A cigarette tax hike and a funding boost for schools are part of House Republicans’ proposed budget.

Ways and Means Chairman Tim Brown’s bill gives schools the same nearly 400-million-dollar increase over two years as Governor Holcomb, but with less money the first year and more the second. Indiana’s economic forecast predicts a better financial picture in the second year of the two-year budget. And Brown says schools have received 800-million dollars in federal aid this year to help plug the gap.

The Public Health Committee voted unanimously to raise the cigarette tax a dollar a pack, but tax bills have to go through Brown’s committee before reaching the full House, and Brown says he’ll cut that hike in half. He says it’s a necessary compromise — he notes many House members don’t want to raise the tax at all. The bill also imposes an additional 10-percent sales tax on e-cigarettes. The health panel had proposed a tax rate based on the amount of e-liquid purchased, not the price.

Raising the tax to $1.50 a pack would move Indiana’s tax past Kentucky and close to Ohio. It would move the state from the 12th-lowest tax rate to 20th-lowest. The original proposal to double the tax would have brought Indiana even with Michigan as the 17th-highest.

Brown says the tax hike is the most effective step Indiana can take to improve public health, by discouraging Hoosiers from smoking, especially pregnant women. He says even at the lower rate, the tax will raise 150-million dollars, to be earmarked for Medicaid.

The budget proposal also includes 50-million dollars for a health grant fund for local communities, targeting not only smoking but diabetes, cholesterol and obesity.

The plan earmarks 150-million dollars for Holcomb’s “Regional Recovery Plan” to help cities and counties join forces on economic development measures. The House has already passed 150-million for summer school to help students who lost ground to the pandemic get caught up, and 30-million to help restaurants and other small businesses.

The proposal more than doubles Holcomb’s proposed spending to upgrade broadband, to 250-million dollars. But it cuts Holcomb’s request to pay off some construction bonds early from 300-million dollars to 110-million. And it eliminates the governor’s request to pour 400-million dollars into unfunded teacher pension liabilities. Legislators approved a similar request last year to free up money for teacher pay, but Brown says the new proposal doesn’t do anything to reduce local school boards’ share.

The House could vote on the spending plan next week. A final budget isn’t expected until the end of the legislative session in April.

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