- Associated Press - Thursday, December 17, 2015

INDIANAPOLIS (AP) - A road funding proposal from Republican leaders of the Indiana House that includes increasing the state’s gasoline and cigarette taxes received a tepid response Thursday from Gov. Mike Pence.

The plan outlined by House Speaker Brian Bosma would add a projected 5 cents a gallon to the state’s gasoline tax and increase by $1 the state’s per-pack cigarette tax to help shift all of the current sales tax on gasoline to funding road projects.

The Republican governor has proposed a $1 billion highway funding boost over four years by drawing money from the state’s cash reserves and taking out loans.

Pence said he believed his plan was the right approach for lawmakers to consider during the General Assembly session that starts in early January.

“I think it’s going to be a very important debate and the proposal that we have to invest a billion dollars in preservation over the next four years I think is the right approach - without a tax increase,” Pence said.

Indiana’s 18 cents-a-gallon gasoline tax was last increased in 2002, and Bosma said Wednesday the plan would index that tax to the inflation rate since then and ensure it automatically changes with national economy without future legislative action.

“Some will say that’s a tax increase. Well, it’s a revenue enhancement,” Bosma said during a panel discussion with other legislative leaders. “Most Hoosiers realize that we’ve got to fund an infrastructure that’s got a lot of wear and tear on it, and they’re willing to do it, according to those I’ve spoken with and surveyed.”

Finding ways to increase road funding is expected to be a major topic of the legislative session that starts in early January. Democrats have been attacking Pence for months over the condition of road around the state, particularly with the monthlong emergency closure of an Interstate 65 bridge near Lafayette over the summer.

House Democrats countered Pence’s proposal with a $2 billion roads plan. Both have met with skepticism from some GOP legislative leaders because they rely on money from the state’s reserves or long-term loans.

Bosma said a $1 increase to the current state cigarette tax would shift Medicaid health care costs linked to smoking onto tobacco users.

That will free up about $300 million from the state’s general fund for roads and put Indiana on course to dedicating all the revenue collected through the 7 percent sales tax on gasoline to road spending. Currently, just 1 percentage point of that tax goes to road spending.

House Democratic leader Scott Pelath has proposed a similar action on the sales tax on gasoline, but he wanted the change to happen immediately.

Republican bill would also call for a state study on the possibility of charging tolls on Interstates 65 and 70 across the entire state, which could generate $365 million a year, said House transportation committee Chairman Ed Soliday, R-Valparaiso.

Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said the proposed tax adjustments would be a tough sell in the Legislature, where many Republicans have pledged never to increase taxes.

“This is the challenge we face on a lot of issues in the Indiana General Assembly,” he said.

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