Monday, December 12, 2011

Tweaked plan for tax breaks clears the House

By Jamey Dunn

A package of tax breaks that failed miserably in the House just two weeks ago passed in the chamber today after undergoing some tweaks.

The main change supporters made to the plan was cutting it into two bills. Senate Bill 400 contained tax breaks for individuals, including raising the Earned Income Tax Credit from 5 percent of the federal credit to 10 percent over two years, and linking the standard personal exemption, which is given to all taxpayers, to federal cost-of-living increases. SB 397 included tax breaks tailored to specific businesses, as well as some cuts geared toward improving the business climate in the state.

The two bills passed today with bipartisan support. SB 397 received a whopping 81 “yes” votes, which is a far cry from the 8 “yes” votes that a similar plan passed by the Senate received on November 29. Rep. John Bradley, who sponsored SB 397, said splitting the plan into two bills made all the difference. He said the move allowed lawmakers to vote for the components they felt were most worthy without feeling like they were being log rolled into passing something they opposed.

“These two bills put together are pretty much the same as the single bill that was defeated two weeks ago,” said Rep. David Harris, a Republican from Arlington Heights who worked with Bradley on a lower-cost House plan that was never called for a vote. “I think that such is the nature of Springfield, that we end up having two bills instead of one — two bills that pretty much do the same thing but end up costing more than one.” However, Harris spoke in favor of both bills, saying that the plan was worthwhile, even if it was not ideal.

Bradley said the plan approved today would have no impact during Fiscal Year 2012, would cost less than $300 million in FY 2013 and would cost less than $350 million in FY 2014.

Rep. Barbara Flynn Currie said 2.5 million low-income, working Illinoisans qualified for the Earned Income Tax Credit in 2010. “It’s an incentive; it’s a reward for hard work, not a giveaway.” Currie, who sponsored SB 400, said giving money back to working families would help the state’s economy. “They’re going to spend it and give us back an economic boost.”

Harris agreed but said the increase in the bill was too large when weighed with other budget pressures in the state. “Many on my side of the aisle seem to be uncomfortable with the Earned Income Tax Credit. I would like to remind my colleagues for low-income wage earners … this is not welfare. This is for people who have jobs and who are productive members of society. We on this side of the aisle should not shy away from the Earned Income Tax Credit. At the same time, we should ask the question, ‘How much can we afford?’”

Other Republicans said the tax cuts for individuals simply cost too much and did not include enough relief for middle-class residents. “This state is penniless. I don’t know that anyone disagrees with it. We all want to help people, but I think if we do it we need to do it on a broad-based … basis,” said Rep. Dwight Kay, a Republican from Glen Carbon.

Floor debate on the package was briefly interrupted after protesters in the House gallery unfurled a large banner urging lawmakers not to give in to threats from businesses by offering them tax cuts. The banner hung down into the chamber until House security snatched it away and escorted the protesters out of the gallery.

The push for the bills that passed today started after the CME Group, which owns the Chicago Mercantile Exchange, and Sears threatened to leave the state. The plan includes tax breaks for both companies, as well as southern Illinois manufacturer Champion Labs, which was added to the deal in the last two weeks.

“We spent the summer working on issues regarding reform of the tax code in Illinois, particularly with regards to businesses in the state of Illinois — trying to create a fair system, trying to create a system which made sense,” Bradley said. “Our timeline, though, for acting on this measure was increased substantially by the potential issues with the relocation of two longstanding Illinois companies, Sears and the [CME Group.]”

James Parasi, chief financial officer for CME, told a House committee this morning that the passage of the plan into law would keep the CME group in the state for years to come. And Sears thanked lawmakers for approving the plan. "We thank the House of Representatives for passing legislation today aimed at keeping Sears an Illinois company. This is a major step in the process. We appreciate the House's efforts and are hopeful that when the Senate returns tomorrow, it will follow suit,” Sears spokesman Chris Brathwaite said in a written statement.

Bradley’s bill included some ideas brought up during the summer hearings, including a return of the net operating loss credit for businesses, which lawmakers voted to suspended as part of the recent income tax increase, and an extension of a research and development tax credit. Bradley said those provisions should help small- and medium-size businesses throughout the state. He added that a measure creating a larger exemption for the estate tax would help family farmers when their land and operations are passed down to their heirs. Bradley has vowed to continue legislative efforts to reform the state’s tax code.

Opponents to the tax cuts for businesses said the state cannot spare the revenue in a time when other vital programs such as education are being cut. “I am outraged that the state of Illinois would give the CME group a tax break while education spending in the state is languishing, and quite frankly, in a state of absolute crisis,” said Kit Main, a member of the Chicago-based community organization Northside P.O.W.E.R. and the group Make Wall Street Pay Illinois, told a House Committee this morning. 

House Republican Leader Tom Cross, who worked with Bradley on the bills that passed today, acknowledged that many in the House disliked some parts of the plan. “There’s a lot of angst on this bill today, I realize that.” But Cross said lawmakers will take many difficult votes in the future, especially in regards to the state’s budget. He said $1 billion more in pension obligations due next year, as well as a stack of Medicaid bills that will be pushed into FY 201,3 would result in the need for unpopular budget decisions. We no longer have any easy choices,” Cross said during floor debate. “You think today’s tough? You think today is a difficult vote. I can’t imagine what it’s going to be like next year. … You ain’t seen nothing yet.” Cross called for sweeping reforms to the tax code, including a reduction in the corporate income tax rate. “If we are going to accept the fact that this state is in as bad of shape as it is — and it is — and we want companies to stay, the picking and choosing [for tax breaks] has got to stop.” Cross said he was optimistic about the Senate approving the two bills when they are in session tomorrow because they are much like a plan the chamber approved two weeks ago.

A prepared statement from Gov. Pat Quinn indicates that he is on board with the plan. Quinn originally supported increasing the Earned Income Tax Credit to 15 percent of the federal rate, but he said the deal that passed today provides “help for both hard-working families and employers.” He also encouraged the Senate to “take swift action tomorrow.”


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