UPDATE: House panel OKs road bill with tax increase

A measure that would finance improvements to Indiana's transportation infrastructure by raising cigarette and gasoline taxes was approved by a House transportation committee Wednesday, offering a long-term alternative to the governor's proposed short-term highway funding plan that does not call for more taxes.

The measure by Rep. Ed Soliday, a Valparaiso Republican who chairs the House Roads committee, was approved on an 8-5 vote, with Democrats on the committee as well as one GOP member voting against it.

Soliday said the plan, which is backed by House GOP leaders, offers a sustainable solution to a problem many states across the U.S. are grappling with — raising Indiana's cigarette tax by $1 a pack while tacking 4 cents onto the state's 18 cents-a-gallon gas tax.

It would also redirect a portion of the state's gasoline tax that lawmakers currently spend on other priorities back to infrastructure projects. And 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.

"What we're asking (for) is enough money in this bill … to stop the decline of Indiana roads," Soliday said. He also contrasted his proposal with Pence's, which calls for a combination of borrowing and drawing down state budget reserves to pump about $480 million into highway projects in 2017.

"We do not like the idea of borrowing on our children's future," Soliday said.

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

Pence, who is facing a tough re-election, frequently emphasizes the fact that his own plan would not raise taxes — a statement he has reiterated in email blasts to campaign donors.

"I think when you have money in the bank and you've got the best credit rating in America, the last place you should look to pay for roads and bridges is the wallets and the pocketbooks of hardworking Hoosiers," Pence said during his recent State of the State address.

Soliday justified an increase by noting the gas tax has not been increased in over a decade. His plan would also allow for future increases that keep pace with inflation. Soliday made the case for increasing cigarette taxes, noting the state spends about $590 million a year on smoking-related illnesses.

"It is fair for folks who have chosen to take the risk to pay the cost of that risk," Soliday said.

Democrats, however, weren't buying it.

Rep. Dan Forestal, D-Indianapolis, said there is no reason lawmakers should raise taxes when the state is sitting on a roughly $2 billion budget reserve — an amount Republicans on the committee justified by comparing Indiana's fiscal policy to the operation of a business.

Forestal said there is "a fundamental difference" between operating a business and stockpiling tax money.

"What we're talking about here is … the people's money that is sitting in a savings account and not doing them any good on their roads," he said.