UPDATE: House GOP unveils road-funding plan with tax hikes

Indiana House Republicans want to increase gas and cigarette taxes to pay for improvements to the state's roads — a proposal they say offers a long-term alternative to Gov. Mike Pence's rival plan that would boost infrastructure spending in the short-term without more taxes.

"This is a small price to pay … for enhanced roads, enhanced bridges and economic infrastructure that is very critical to create jobs, to maintain jobs," House Speaker Brian Bosma said Monday after formally releasing the plan.

If ultimately approved by the Legislature, the plan would pump $500 million a year into road spending, with the majority of it going toward maintaining existing infrastructure, said Bosma, who estimated the average motorist would pay $25 more each year in gasoline taxes.

Smokers would be on the hook for considerably more, paying an additional $1 in taxes on each pack of cigarettes. The plan would also change the way lawmakers spend a portion of current gas tax revenue, redirecting some gas tax money from other priorities back to roads. It would give municipalities with a population greater than 20,000 the authority to raise their own vehicle registration taxes to help pay for local improvements.

The condition of Indiana's roads has emerged as a major issue not only for lawmakers, but also on the campaign trail. There is a major division among majority Republicans over how to fund improvements, with Pence and the Senate leaders signaling they are at odds with the House.

The gas tax of 18 cents a gallon has not been increased in more than a decade. Pence, who is facing a tough re-election, has frequently touted the fact that his own road-funding plan would not raise taxes — a statement he has reiterated in email blasts to campaign donors. He proposed borrowing $240 million while drawing $241 million from the state's budget reserves to boost short-term roads spending in 2017.

That idea got a frosty reception from the House GOP last October when Pence first announced the plan — a dynamic that was reversed Monday when the governor gave a less-than-receptive welcome to the House's plan.

"Governor Pence believes the last place to look when we have the best credit rating and $2 billion in reserves is in the pocketbooks of hardworking (Indiana residents)," spokeswoman Kara Brooks said in a written statement.

President Pro Tempore David Long, a fellow Republican, declined to comment on the House plan Monday, though he was receptive to Pence's proposal when it was first announced.

Tension between Pence and Bosma has been noticeable recently, most notably over policy differences — though both deny there's any animosity between the two.

"Despite reports to the contrary, we have a great relationship and we'll talk about this," Bosma said Monday. "There's a lot of time yet for these discussions to transpire."

Bosma also said that he has established "street cred" as someone who has previously pushed a long list of tax cuts through the Legislature.

The House plan is supported by the Indiana Chamber of Commerce, which dismissed Pence's idea as "just another stop-gap proposal."

But it drew opposition from Americans for Prosperity — the main political advocacy group for Charles and David Koch, billionaire brothers who spend millions on conservative causes. The group said in a written statement that lawmakers need "prioritize existing tax revenue for transportation funding needs rather than hiking the gas tax and otherwise take more money from Hoosiers' wallets."