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Illinois Budget, Illinois Income Tax

Gov. Pat Quinn Agrees to 75% Illinois Income Tax Increase to Balance Illinois Budget

(Springfield, IL) – January 7, 2011. Governor Pat Quinn and top legislative Democrats in Springfield say they have an agreement that will erase Illinois’ $15 billion deficit, send more money to Illinois schools and limit state spending for three years.

But it will take a 75% hike in income taxes and billions more in state borrowing to make it all happen.

Illinois Senate President John Cullerton (D-Chicago) announced the deal late Thursday. A vote on the measure is pending.

Under the provisions Illinois taxpayers will see their income tax rate jump from 3 percent to 5.25%. The corporate tax rate would climb to 8.4%.

Cullerton estimates that the personal income tax increase will bring in $6.2 billion to the state.  He put the price tag for the corporate tax hike at $1 billion a year.

The deal also includes just over $12 billion in borrowing. Cullerton said $3.7 billion of that borrowed money will go to pay this year’s pension obligations.  The rest will go toward Illinois’ mountain of unpaid bills.

“People would get paid money that is owed to them. It’ll help the economy when we infuse that much money back into the economy and pay those bills off,” said Cullerton.

Illinois owes about $5.2 billion in unpaid bills dating back to the summer. The tax and borrowing plan would pay those bills by the end of March.

There is also money earmarked for schools. Cullerton said a quarter of 1% of the total income tax hike will be set-aside for property tax relief and education funding.  Another $377 million for schools would come from a to-be voted on cigarette tax increase, which would add a dollar per pack tax to the price.

House Democrats, particularly members of the Black Caucus, were demanding at least some new money for schools. State Rep Will Davis (D-East Hazel Crest) said now that top Democrats have come to terms on the details, a vote could come as early as Sunday.

“Right now our goal is 60 votes,” Davis said. “We hope it’s bipartisan, which means [Republicans] support trying to put more money in education and human services. But at this point we’re looking for 60 votes.”

Republicans say all the votes likely will have to come from Democrats. State Sen. Dave Syverson (R-Rockford) said he doesn’t see how any GOP lawmakers can vote for a 75% income tax increase in this economy.

“We’re getting ready to pass a record tax increase, but the new governor of Wisconsin is talking about cutting taxes there to stimulate his state’s economy, ” Syverson said.

Syverson is also worried about an inrease in corporate tax rates and the dollar per pack bump in the price of cigarettes.

“Any border community has to be worried about that. It’ll devastate Rockford and could hurt a lot of other communities as well,” said the senator.

There are a number of expiration dates that are to be built into the legislation.  All but .25% of the personal income tax increase is set to expire in four years.  Future lawmakers would have to decide if they want to make it permanent. The pension borrowing component is to be paid back over the next eight years.  Borrowing for the past due bills is on a 14 year repayment plan.

The income tax increase would be based on 2011 incomes, back to Jan. 1, according to Cullerton.  But he is quick to say that homeowners will get a property tax credit this year, and property tax rebate checks of $325 starting in 2012.

Cullerton said the tax increase and borrowing plan of 2011 should settle Illinois’ budgets until at least 2014.

“Eight-billion-dollars will go back into the economy; people will be paid on time,” he said. “Our credit rating will be dramatically improved. We will then have a balanced budget with virtually no growth for the next four years.”

There are a few tweaks that could come between now and when the Illinois House is expected to vote on the tax increase this weekend.  Lawmakers will have to vote quickly – a new General Assembly will be sworn in Wednesday.

About David Ormsby

David, a public relations consultant and Huffington Post blogger, is an ex-Press Secretary of the Illinois Democratic Party.


2 thoughts on “Gov. Pat Quinn Agrees to 75% Illinois Income Tax Increase to Balance Illinois Budget

  1. I can see the necessity for the tax hike. But at the same time I think the Governor should look hard and long at trimming the jobs in the state government and the salaries that go with those jobs. Plus he should do some checking on whether the people in their jobs are really doing their jobs. I think there is a lot of “dead weight” Maybe it would also be a good idea to check the contracts for work done for the state and make sure those prices paid are real…I think that a lot of our tax money doesn’t end up going to our state but gets lost somewhere along the line…

    Posted by Jan | January 7, 2011, 11:24 AM
  2. This is an absolutely awful compromise. The personal income tax is the only reasonable tax this state has. When I moved here, I used an out of state lender and when I gave her the property tax info for the house my wife and I purchased, she told me to go back and get the right info because there was no way a house in that price range could have taxes that high. She was wrong; property taxes in Illinois are double what typical states have. It’s absurd for high tax states like Illinois to conclude the problem with budget deficits is taxes are too low. This is what we get for electing a governor who openly supports raising taxes. Sadly, this state is on a ever-accelerating course to mediocrity at best. Heads up Detroit, we’re catching up to you.

    Posted by oterj0 | January 8, 2011, 1:03 PM

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