Thursday, September 03, 2009

Hynes challenges Quinn and his tax plan

By Bethany Jaeger
The Democratic primary election between Illinois Gov. Pat Quinn and Comptroller Dan Hynes gained another dynamic Wednesday as Hynes officially announced his candidacy for governor with a proposal to raise the state income tax based on income.


Both political campaigns are staying true to their original slogans that we wrote about during the State Fair. Hynes says Quinn received his job by default after the legislature impeached former Gov. Rod Blagojevich and that Quinn has since failed to implement a consistent and calibrated agenda. Quinn, on the other hand, maintains that Hynes, as comptroller, has stood on the sidelines as a “shrinking violet.”

Before today, however, Hynes had not officially announced where he stood on an income tax increase other than saying the legislature and governor should look to cut spending first. On Wednesday, he announced, first in Chicago then in Springfield, a three-step plan that would rely on various cuts and efficiencies this fiscal year and propose a graduated income tax next fiscal year.

Because the state Constitution specifies Illinois’ income tax rate is a “flat” rate applied evenly to individuals, as well as a separate flat rate applied to businesses, changing the tax structure to a graduated rate would require a constitutional amendment. Hynes said he would want the General Assembly to approve a measure to put the question to voters about whether to change the Constitution in the November 2010 election.

The graduated rate, according to Hynes, would range from the current 3 percent on individuals to a new 7.5 percent, which Hynes said would only apply to individuals who make more than $1 million a year. He would not change the corporate rate. If instituted in January 2011, Hynes said the new tax would generate $5.5 billion to help close the budget deficit his second year in office.

Quinn, in his March budget proposal to the General Assembly, proposed raising the individual income tax rate from 3 percent to 4.5 percent and the corporate rate from 4.8 percent to 7.2 percent, but he would keep the rate “flat,” which would not require a constitutional amendment.

“Rather than taking years to enact through a constitutional amendment, it could have been done quickly through an act of the legislature,” said John Kupper, spokesman for the Taxpayers for Quinn campaign.

Quinn also wanted to triple the personal tax exemption, which he said in March would mean that about half of the state’s taxpayers would pay less, while the other half would pay more than they currently do.

Today, Hynes countered that Quinn would levy a 50 percent higher tax rate on all taxpayers, while his proposal would only increase taxes on those making more than $200,000 a year. “Because of the graduated income tax and the way it is designed, you’re actually going to pay more under Pat Quinn’s plan, even if you make a half a million dollars a year,” Hynes said in Springfield. “That is why his plan is not only inequitable and unfair, but really, wrongheaded and backwards.”

Both Quinn and Hynes use similar language — cut spending before seeking higher taxes — (we quoted Quinn as saying it in June, when budget negotiations hit a stalemate). Quinn cut $1 billion in spending already and said he is working toward another $1 billion as part of the final budget agreement for fiscal year 2010 (the current year).

But Hynes says Quinn’s approach to cutting is across-the-board and, therefore, unfair. Instead, one of Hynes’ cost-cutting proposals is to fire half of Blagojevich’s political employees or appointees making more than $70,000 a year. Hynes said his campaign identified 1,600 such employees through state payroll. Firing half of them, or 800 workers, would save $100 million a year, he said, but it would be up to the governor and his agency directors to determine which half to fire.

Other immediate cost-saving measures proposed by Hynes today include reducing discretionary grants, slashing contracts for advertising, consulting and other professional services and closing so-called tax loopholes by expanding the state sales tax to include such “luxury” services as Botox cosmetic injections, car and truck rentals and membership of private clubs. He’d also borrow $1.5 billion to pay down backlogged bills, which he said would leverage enhanced federal reimbursements temporarily available through the federal stimulus package.

Hynes said those would be the prelude to the second year, when he would then increase the income tax, merge the comptroller’s and treasurer’s offices and create two or three more gaming licenses to open new casinos, among other ideas. (See his proposals here.)

Several of his ideas — instituting a graduated income tax structure, building three new casinos, increasing the sales tax on cigarettes by $1, closing corporate tax breaks and prohibiting the state from rolling over unpaid bills into the next fiscal year — have been proposed within the past few years but have all stalled in the legislature.

In a phone interview shortly after the Springfield event, Hynes said legislators who opposed those ideas in the past might look at them in a different light under the current economic and fiscal circumstances. He added that his leadership style would differ. “I’d like to think that I have the ability to persuade lawmakers that this is the correct path. Part of that is leadership. Part of it is having a clear vision and being consistent, not wavering, not waffling and not changing your opinion, your position and your plan every week.”

Kupper of the Quinn campaign dismissed Hynes’ ideas as playing politics. “In a very real sense, this is a proposal that was put together for the benefit of a political campaign and not a serious effort to address the state’s fiscal problems,” he said. “It’s a lot of rehashed proposals that came right out of the political playbook 101. The question is better addressed to Dan Hynes as to how he is going to enact these things, since he’s pretty much been on the sidelines as these budget issues have been debated.”

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