House Dems paint picture without tax hike

By Bethany Jaeger, with Hilary Russell contributing
House Democrats maintain that without Republican votes, an income tax increase is likely to fail. And the back-up plan isn't pretty.

House Democrats did advance a two-year income tax increase and a phased-in earned income tax credit for low-income families this morning. Senate Bill 2252 would net about $4.5 billion for state coffers, House Majority Leader Barbara Flynn Currie said in committee. The personal tax rate would increase from 3 percent to 4.5 percent, while the corporate rate would increase from 4.8 percent to 7.2 percent, ending in 2011. The earned income tax credit would phase in from 5 percent to 7.5 percent the first year, followed by an increase to 10 percent the second year. It would be permanent after that.



Without new revenue, House Democrats could resort to sweeping money out of dedicated funds and refinancing debt as the only new revenue sources for a total of about $4.5 billion, according to Assistant Majority Leader Frank Mautino. That would result in state agencies getting about 80 percent of their annual budgets, and only about half of the grants for community services would get funded.

“So it’s not a partial budget,” Mautino said after committee. “That’s how much money is approved, and that’s how much they will get.”

Currie said during committee that the state is more than $7 billion out of whack today. And even if a temporary income tax increase generated $4.5 billion, the General Assembly would still have to curb spending.

“If anybody thinks this is a way to duck out of our responsibility to tighten our belts, the answer is, it doesn’t make it. But it will help prevent the kinds of disasters that real people face if we don’t do something to stem the tide.”

The lack of new revenue, she said, would result in a 68 percent cut across the board for state agencies. That would affect everything from childcare programs for low-income working parents to services for the developmentally disabled and mentally ill.

All Republicans in the committee voted against the tax increase and sided with business groups, which argued that the proposal would give Illinois the second highest tax rate in the country and further discourage businesses from investing in this state. Todd Maisch of the Illinois Chamber of Commerce added that the income tax increase would not address the deeper problem. “Between pensions and government-funded health care, if you don’t do anything to address those issues, you’re going to be back here in two years still needing another tax increase,” he said during committee. “The drivers of the costs are going to outrun the revenues you’re going to get from the tax increase.”

Rep. Mark Beaubien, a Barrington Hills Republican, said Illinois has gone down the road of a temporary tax increase before. “I think the citizens know where that’s going to go in the future.” The General Assembly levied temporary income tax increases twice in the 1980s. The 1989 increase was made permanent under then-Gov. Jim Edgar.

Meanwhile, the House committee also advanced a measure that would intend to soften the blow for retailers if the state increased the sales tax on cigarettes by a $1 over two years, as proposed in SB 44. Rep. John Bradley, a Marion Democrat, sponsored SB 415 in response to retailers' concerns, which we wrote about before. It would only take effect if the cigarette tax increase were approved.

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Cigarette tax phase-in

By Jamey Dunn
A proposed $1 a pack increase in the sales tax on cigarettes moved quickly through the Senate and awaits a final vote in the House. Although the bill, as written, has momentum and solid support among Democrats, opponents made a case for a compromised version today.


The Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores commissioned a study by Illinois State University on the impact of the proposed increase. Both organizations say the increase would negatively effect retailers they represent.

Bill Fleischli, executive vice president of the Illinois Association of Convenience Stores said: “The convenience store industry is a major employer in the state of Illinois, with facilities in every county. If this tax is enacted, it will paralyze this industry. It will cripple expansion, cost Illinois jobs, and all this will slow an economic recovery that Illinois so badly needs.”

Opponents to the tax argue that it would drive customers to border states with lower taxes, and that while Illinois residents are in those states, they also would purchase gasoline and meals. Greg Blankenship, spokesman for the tax watch dog organization Illinois Alliance for Growth, said the tax hike is regressive because smokers tend to have lower incomes, and that it is unreliable because it could drive down cigarette sales in the state. He added that lawmakers seem unsure about whether the tax is meant to address a public health issue or create revenue for the general fund.

“Is the purpose of this tax to stop people smoking, or is it to plug a budget deficit?” Blankenship said. “I mean, you really can’t have it both ways.”

The study proposes a compromise that would still result in a $1 per pack increase. The measure that is in the House would increase the tax $1 over the next year. The study suggests increasing the tax over four years, a quarter per year, to avoid a sticker shock to smokers. The study claims that this model would result in more revenue in the long run because people would be more likely to accept a gradual increase and continue buying cigarettes in Illinois.

Don Apgar, division manager for Martin and Hayley Inc., which operates Huck’s convenience stores throughout the Midwest, said without the sticker shock, fewer smokers might leave the state to buy cigarettes.

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"Trifecta" heads to the governor

The House on Thursday night nearly unanimously approved the $9 billion plan for federal stimulus funds, transportation projects and supplemental spending for state operations. The Senate approved the package earlier in the day. The spending plans now head to Gov. Pat Quinn’s desk, satisfying the governor’s request for the General Assembly to approve a small version of a capital plan for roads and bridges before lawmakers left on a two-week spring break.



House Republicans early in the day weren’t on board because it wasn’t clear how the money would be spent, said House Minority Leader Tom Cross. However, working with Quinn’s office throughout the day, he said his caucus finally got a list. “The governor was very helpful, both himself personally and his staff, in trying to make this happen,” he said.

“Today’s actions are a great example of what we can accomplish when we come together with a common purpose,” Quinn said in a statement.

Senate President John Cullerton, however, foreshadowed the difficulty in securing the three-fifths majority needed to do a larger capital program based on tax and fee increases later.

Cigarette tax advances
By Jamey Dunn
A timely example of that difficulty in advancing any tax increase occurred early in the evening. After missing the mark by one vote the first time, a $1 sales tax increase on each pack of cigarettes advanced through the Senate Thursday when a second vote was taken.

Senate Bill 44, which would phase the tax increase in over two years, had 29 in favor, 28 opposed and one voting present. It took a last-minute, closed-door meeting between Cullerton and House Speaker Michael Madigan before the vote was retaken, resulting in the 30 votes needed to pass. Twenty-six members still voted against it.

Cullerton said that the bill has support from Madigan and Gov. Pat Quinn, but he added that the close vote indicates a difficult road ahead for future tax increases. “This was the first bill that required people to actually vote for a tax,” he said. “And you can see it’s not easy for people to do that. Unfortunately, we’re probably going to have to do a lot more.”

The bill heads to the House, which will reconvene Friday morning. The Senate finished its business and headed home for spring break.

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