Monday, March 16, 2009

Tax increases will spark controversy

By Jamey Dunn
Gov. Pat Quinn already faces opposition from the business community to a possible income tax increase, even though his budget address will not take place until Wednesday. The Tooling and Manufacturing Association released a proposal today that suggests making budget cuts before turning to tax increases to solve the state’s deficit.

The premise of the plan is that Illinois corporations and families must pare down their budgets to survive difficult financial times, so the state should follow suit. “There really are some areas that we can cut in this budget before we go to that tax increase,” said Zach Mottl, chairman of the association’s government relations committee.

The association suggests a state hiring and promotions freeze, as well as changes to the state pension system that would resemble a private-sector 401(k) plan. That could include requiring larger employee contributions, getting rid of guaranteed retirement benefits and raising the retirement age to 67. The plan also includes substantial cuts to public schools, higher education and Medicaid. The only budgetary increase the association recommended was money for a job training grant program.

The plan also suggested that Quinn meet with business and labor groups to discuss changes to the worker’s compensation system, and they wanted him to reconsider his position on closing so-called corporate tax loopholes that the group said offer incentives to stimulate business growth in Illinois.

Ralph Martire (scroll down), executive director of the Chicago-based Center for Tax and Budget Accountability, recently said that budget cuts will actually hurt the state’s economy and result in job loss. He said that a progressive tax increase, which would put more of the tax burden on the wealthy, is the solution for getting the state through the recession.

“If the state raises taxes progressively and maintains its expenditures on essential public services, we have the potential to shorten the recession in Illinois by half a year, maintain or grow jobs and actually do something that counters the negative impact of this spiral down for most people in the state,” Martire said in a Statehouse news conference last week.

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