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Revenue increase will affect income tax negotiations

INDIANAPOLIS – A modest increase in expected revenue growth released Tuesday sets the final stage for negotiations on a biennial budget, including whether Gov. Mike Pence gets his full proposed income tax cut.

Forecasters predicted Indiana will have an additional $290 million in tax revenue for the next budget cycle.

"I believe this provides the kind of resources that make us more confident than ever that we can pass a balanced budget that funds our priorities, including increased funding for roads and schools, and provides Hoosiers with the kind of tax relief that they need and deserve," Pence said.

But he also seemed to retreat slightly from pushing for a full 10 percent income tax cut for individuals, costing the state more than $500 million annually.

"Income tax relief should be a part of any final budget agreement. But I'll also say … I believe that phasing out the inheritance tax ought to also be part of that budget agreement. I think a mix of income tax relief and inheritance tax relief provides a frame work in which we can lay a foundation for real economic growth in our state."

There is a 3 percent individual income tax cut in the latest version of the budget, at a cost of about $150 million annually.

Legislative budget leaders applauded the revenue news but said it doesn't change the discussion much.

"It's good news. We're glad it's moving up. It's a positive thing for Indiana to finally see some light here," said Senate Appropriations Chairman Luke Kenley , R-Noblesville.

He and House Ways and Means Chairman Tim Brown, R-Crawfordsville, said they are committed to providing $500 million in tax relief, but it remains to be seen how it will be divided between an income tax cut, financial institutions tax reduction and inheritance tax repeal.

And how you count the $500 million is key.

"There's going to be tax cuts in any budget that comes out of the General Assembly this year," Brown said. "This is great news for Hoosiers to think about what the future looks like. But everybody's still crawling out of the recession, so we want to give money back to Hoosiers."

Kenley continues to count a phase-down of the corporate tax as $200 million in annual relief, even though legislators passed that reduction in 2011.

The budget in negotiations has no corporate tax cuts.