By Caitlin Rydinsky
After months of discussion on tax reform, the House Revenue and Finance Committee on Wednesday passed an amendment that would tighten the rules on a high-profile tax incentive for businesses.
The legislation, House Bill 3890, will change the requirements for the Economic Development for a Growing Economy (EDGE) tax credit. House Speaker Michael Madigan, who sponsored the bill, said it would allow smaller businesses to apply for the credits, retain jobs within businesses and help spur development in communities with high rates of poverty and unemployment.
Madigan admitted before the committee that the legislature “fell into a habit” of treating companies individually who could not use their EDGE credit—because they had no tax liability to the state—despite meeting all of the other negotiated qualifications within the credit. Lawmakers began evaluating the incentive, as well as others, after several businesses lined up for Special EDGE credits, to use the credit toward other tax liabilities.
The legislation would eliminate the $100 million capital spending requirement for small businesses that employ fewer than 100 employees. The bill would require them to hire five new employees to gain the incentive.
Many opponents said they support eliminating the spending requirement for smaller companies, but that they do not agree with how it is being done.
Doug Whitley, president and chief executive officer of the Illinois Chamber of Commerce, who opposes the changes, said, “This labyrinth of exceptions and limitations is so lengthy that I would suggest to you that almost no one is going to comply with this EDGE credit.” Whitley was critical that the measure would still require that lawmakers approve special EDGE credits. “ I thought you were trying to get out of that business,” he said.
While supporters of the tax credit said that it would increase the amount of small businesses that qualify, Carol Portman of the Taxpayers’ Federation of Illinois said that many small businesses don’t pay state income taxes, so she doesn’t see how much it would actually help.
Madigan’s legislation would give special preference to businesses in economically depressed areas. Some argue this may limit development throughout the state.
Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers Association, said that because the legislation looks at Census tracks instead of entire communities, a business in a struggling town might not qualify just because of its address. Denzler said that growth in depressed areas is important but that lawmakers should not turn away jobs in more affluent areas. “A job is a job. Do we really want to be discriminant against jobs?”
The most controversial piece of the proposal would require businesses receiving the special EDGE credit to publicly release tax information. Madigan said “the business must agree to disclose income tax information during the term of its EDGE agreement, including gross income, the amount of income allocated to Illinois and net income before and after credits are applied.”
Denzler and others in the business community are fundamentally opposed to requiring companies to release tax information. Denzler noted that tax disclosure has been a popular subject for some Democrats, and he said he thought that the requirement might be “throwing a bone” to those who would like to see corporations have to open up their books to the public.
“I will say that what they what the speaker has done is limit … those entities that are going to come to the state and ask for that special treatment in allowing the credits to be used for withholding,” said the ranking Republican on the committee, Rep. David Harris, who is from Arlington Heights. “The way that it’s going to be limited is that those entities are not going to want to disclose all the kind of information that is asked to be disclosed. I have a problem even asking for that, but it’s limited strictly to the [special EDGE tax credit], so I don’t think this is a harmful move and [it] makes some positive reforms.”
Showing posts with label state income taxes. Show all posts
Showing posts with label state income taxes. Show all posts
Wednesday, May 14, 2014
Thursday, March 20, 2014
Madigan proposes millionaire tax for education
By Jamey Dunn and Caitlin Rydinsky
House Speaker Michael Madigan proposed today a constitutional amendment to impose a higher tax on millionaires, which would bring in an additional $1 billion for school funding.
Under the proposal, Illinoisans would pay an additional 3 percentage points surcharge on any income they made over $1 million. The revenue generated, which Madigan estimates could be $1 billion, would be given to each district throughout the state based on the number of students. He estimates that schools would get an additional $550 per pupil. “Over the last several years, every area of Illinois has experienced school closures, teacher layoffs, and classroom cuts due to reduced education funding that has been forced by a crowding out of state revenues,” Madigan said in a written statement. “This is not a complete solution to our education funding issues, but it is a fair and equitable way to reverse a decline brought on by the national economic problems and will help address a number of spending pressures that vary among school districts.”
If both chambers approve the plan by May 5, voters will have the deciding factor of whether millionaires’ should be taxed the additional amount during this November election. Illinoisans’ may also see an amendment to add term limits for lawmakers placed on the ballot from the efforts of Republican governor candidate and multi-millionaire businessman Bruce Rauner. In addition to running for governor, Rauner has launched a campaign to get term limits on the ballot by collecting signatures through a citizens’ initiative. There is also a push to get an amendment on the ballot to change the way the state draws its legislative districts. If either proposal gets the needed signatures, they would likely also have to survive a court challenge to make it to the ballot.
If Madigan’s plan appears on the November ballot and gains the necessary support from voters, schools could expect to see additional funds in 2015, he said. “Given the drastic cuts to education in recent years, and the threat of cutting nearly $1 billion more in this year’s budget, we are encouraged by the speaker’s proposal to invest more money in public education for our children,” Illinois Federation of Teachers President Dan Montgomery said in a written statement.
For the last three years, the state has failed to meet the per pupil funding level required by law of $6,119. Illinois’ temporary income tax increase is scheduled decrease in 2015 from 5 percent to 3.75 for individuals. The lost revenue means that lawmakers are looking at a tough task as they try to craft next fiscal year’s budget. Early projections indicate that almost $1 billion could be cut from schools. Meanwhile, the Illinois State Board of Education requested a funding increase of $1.08 billion for next fiscal year. The bulk of the request, $879 million, would be needed to meet foundation level funding.
Opponents to the amendment say it is nothing more than a political move meant to polarize voters in an election year. They also suspect it is a distraction from what they believe Madigan’s real intent is—to make the temporary income tax increase permanent. Madigan has not taken a stance on what the state should do about the income tax increase; he says the two topics are not linked. “That’s a separate issue. This is separate from the question of whether the income tax increase would be extended. It’s not related.” Madigan said that his plan is not meant to fill in the gaps of potential cuts. “I think that what we are doing here is calling upon people in Illinois that are well equipped to provide support for education which is available to everybody in the state,” he said.
Conservative groups say that the proposal would drive wealth people out of the state. They also note that it could hurt small businesses that file their taxes as individuals. “With the second highest unemployment rate in the nation, one would think the Democrat[ic] leaders of Illinois would want to grow jobs for our families. Unfortunately, yet again they choose to pursue policies that will push more jobs out of the Land of Lincoln by punishing job creators,” David From, the Illinois state director of Americans for Prosperity, said in a written statement. Madigan, who acknowledged that there are some years in which he would earn enough to have to pay the surcharge, said of millionaires in the state: “If they’re in Illinois today, they’re probably so much in love with Illinois that they’re not going to leave, and they’ll be grateful for this opportunity to support lower (grade level) education.” Madigan estimates that in 2011, there were 13,675 millionaires in Illinois.
Rauner ‘s campaign shot back with a statement highlighting his personal giving to schools and education reform efforts. “Bruce is happy to pay more to support education—in fact he's been doing that personally for decades, but he doesn’t support what looks like a first step towards empowering Mike Madigan and [Gov.] Pat Quinn to raise taxes on the middle class, small businesses and family farms,” said a prepared statement from campaign manager Chip Englander.
House Speaker Michael Madigan proposed today a constitutional amendment to impose a higher tax on millionaires, which would bring in an additional $1 billion for school funding.
Under the proposal, Illinoisans would pay an additional 3 percentage points surcharge on any income they made over $1 million. The revenue generated, which Madigan estimates could be $1 billion, would be given to each district throughout the state based on the number of students. He estimates that schools would get an additional $550 per pupil. “Over the last several years, every area of Illinois has experienced school closures, teacher layoffs, and classroom cuts due to reduced education funding that has been forced by a crowding out of state revenues,” Madigan said in a written statement. “This is not a complete solution to our education funding issues, but it is a fair and equitable way to reverse a decline brought on by the national economic problems and will help address a number of spending pressures that vary among school districts.”
If both chambers approve the plan by May 5, voters will have the deciding factor of whether millionaires’ should be taxed the additional amount during this November election. Illinoisans’ may also see an amendment to add term limits for lawmakers placed on the ballot from the efforts of Republican governor candidate and multi-millionaire businessman Bruce Rauner. In addition to running for governor, Rauner has launched a campaign to get term limits on the ballot by collecting signatures through a citizens’ initiative. There is also a push to get an amendment on the ballot to change the way the state draws its legislative districts. If either proposal gets the needed signatures, they would likely also have to survive a court challenge to make it to the ballot.
If Madigan’s plan appears on the November ballot and gains the necessary support from voters, schools could expect to see additional funds in 2015, he said. “Given the drastic cuts to education in recent years, and the threat of cutting nearly $1 billion more in this year’s budget, we are encouraged by the speaker’s proposal to invest more money in public education for our children,” Illinois Federation of Teachers President Dan Montgomery said in a written statement.
For the last three years, the state has failed to meet the per pupil funding level required by law of $6,119. Illinois’ temporary income tax increase is scheduled decrease in 2015 from 5 percent to 3.75 for individuals. The lost revenue means that lawmakers are looking at a tough task as they try to craft next fiscal year’s budget. Early projections indicate that almost $1 billion could be cut from schools. Meanwhile, the Illinois State Board of Education requested a funding increase of $1.08 billion for next fiscal year. The bulk of the request, $879 million, would be needed to meet foundation level funding.
Opponents to the amendment say it is nothing more than a political move meant to polarize voters in an election year. They also suspect it is a distraction from what they believe Madigan’s real intent is—to make the temporary income tax increase permanent. Madigan has not taken a stance on what the state should do about the income tax increase; he says the two topics are not linked. “That’s a separate issue. This is separate from the question of whether the income tax increase would be extended. It’s not related.” Madigan said that his plan is not meant to fill in the gaps of potential cuts. “I think that what we are doing here is calling upon people in Illinois that are well equipped to provide support for education which is available to everybody in the state,” he said.
Conservative groups say that the proposal would drive wealth people out of the state. They also note that it could hurt small businesses that file their taxes as individuals. “With the second highest unemployment rate in the nation, one would think the Democrat[ic] leaders of Illinois would want to grow jobs for our families. Unfortunately, yet again they choose to pursue policies that will push more jobs out of the Land of Lincoln by punishing job creators,” David From, the Illinois state director of Americans for Prosperity, said in a written statement. Madigan, who acknowledged that there are some years in which he would earn enough to have to pay the surcharge, said of millionaires in the state: “If they’re in Illinois today, they’re probably so much in love with Illinois that they’re not going to leave, and they’ll be grateful for this opportunity to support lower (grade level) education.” Madigan estimates that in 2011, there were 13,675 millionaires in Illinois.
Rauner ‘s campaign shot back with a statement highlighting his personal giving to schools and education reform efforts. “Bruce is happy to pay more to support education—in fact he's been doing that personally for decades, but he doesn’t support what looks like a first step towards empowering Mike Madigan and [Gov.] Pat Quinn to raise taxes on the middle class, small businesses and family farms,” said a prepared statement from campaign manager Chip Englander.
Sunday, January 06, 2013
Tax transparency and assault weapon ban appear stalled
By Jamey Dunn
A proposal that would require publicly traded corporations to share some tax information with lawmakers was shot down by a House committee today, and the chamber is also unlikely to take up an assault weapons ban before the new General Assembly is sworn in on Wednesday.
Senate Bill 282 would require publicly traded corporations that do business in Illinois to share tax information, such as their incomes, tax liability and tax credits. The information would not be made available to the public until two years after it was filed with secretary of state. At that time, it would be available to the public through a searchable online database. Proponents said lawmakers need the information to make educated decisions about tax policy. “This is about providing us with good information, so as we are making policy tax policy, we have a pretty good idea of what we’re doing,” said Chicago Democratic Rep. Barbara Flynn Currie. The measure passed in the Senate during the fall veto session.
But those opposed say the measure is a violation of privacy. They say that competitors could use such information to get an edge. “The linchpin, one of the pillars of a volunteer tax system, is confidentiality,” said Tom Johnson, president emeritus of the Taxpayers Federation of Illinois.
One lawmaker who voted for the bill described it as an “overstep” but said he thinks legislators need more information when making decisions about tax laws. “From my own personal experience, one of the big frustrations that we’ve had in this committee is that we can’t get the information we need in order to make tax policy,” said Rep. John Bradley, the chair of the House Revenue and Finance Committee. He said he voted in favor of the bill to send a message that lawmakers need to know more about what businesses pay in taxes,“so that we can do a better job figuring out what we are up to when it comes to creating tax policy in this state.”
Illinois legislators probably will not consider a ban on assault weapons before the current legislative session ends on Wednesday. “We are not going to be proceeding on the legislation regarding the assault weapons ban, and I think that will be the case for balance of the 87th General Assembly,” said Northbrook Democratic Rep. Elaine Nekrtiz, chair of the House committee that was scheduled to take up the weapons ban today.
A proposal that would require publicly traded corporations to share some tax information with lawmakers was shot down by a House committee today, and the chamber is also unlikely to take up an assault weapons ban before the new General Assembly is sworn in on Wednesday.
Senate Bill 282 would require publicly traded corporations that do business in Illinois to share tax information, such as their incomes, tax liability and tax credits. The information would not be made available to the public until two years after it was filed with secretary of state. At that time, it would be available to the public through a searchable online database. Proponents said lawmakers need the information to make educated decisions about tax policy. “This is about providing us with good information, so as we are making policy tax policy, we have a pretty good idea of what we’re doing,” said Chicago Democratic Rep. Barbara Flynn Currie. The measure passed in the Senate during the fall veto session.
But those opposed say the measure is a violation of privacy. They say that competitors could use such information to get an edge. “The linchpin, one of the pillars of a volunteer tax system, is confidentiality,” said Tom Johnson, president emeritus of the Taxpayers Federation of Illinois.
One lawmaker who voted for the bill described it as an “overstep” but said he thinks legislators need more information when making decisions about tax laws. “From my own personal experience, one of the big frustrations that we’ve had in this committee is that we can’t get the information we need in order to make tax policy,” said Rep. John Bradley, the chair of the House Revenue and Finance Committee. He said he voted in favor of the bill to send a message that lawmakers need to know more about what businesses pay in taxes,“so that we can do a better job figuring out what we are up to when it comes to creating tax policy in this state.”
Illinois legislators probably will not consider a ban on assault weapons before the current legislative session ends on Wednesday. “We are not going to be proceeding on the legislation regarding the assault weapons ban, and I think that will be the case for balance of the 87th General Assembly,” said Northbrook Democratic Rep. Elaine Nekrtiz, chair of the House committee that was scheduled to take up the weapons ban today.
Tuesday, January 10, 2012
Quinn signs tax breaks; says he is ready to take on pension changes
By Jamey Dunn
Gov. Pat Quinn today signed a tax break for low-income workers and said changes to the public employee pension systems are a top priority for him in 2012.
Quinn signed Senate Bill 400, which will increase the Earned Income Tax Credit (EITC) from 5 percent to 10 percent of the federal credit over two years. The increase will start for tax year 2012, moving it up to 7.5 percent of the federal credit, so it will not apply in the coming months as Illinoisans are filing their 2011 income tax returns.
According to Quinn about 935,000 households will benefit from the credit. He said a single mother earning $12,800 a year would save about $150 on her taxes, and a family of five with a household income of $30,000 would save about $199 this year. “It’s very important here in Illinois that we help parents raising children, parents who are working, and they are working hard and they are living from check to check every month. We want to make sure that those paychecks have enough money for the family to pay its bills and raise their children right. So that’s really our mission in Illinois, to help everyday people raising children living form paycheck to paycheck,” Quinn said today at a bill signing event.
Supporters of the increase argue that it will also help to spur local economies. “That family is not going to admire money in a bank vault, especially now. They are going to go out and spend the money in their local economy, creating jobs for local businesses in particular,” Quinn said. “There are some who think that the Earned Income Tax Credit and tax relief for working families is not part of job creation, and they’re just plain wrong.”
Rhonda Jones, a single mother who has three children in college and two more in high school, said she has often spent money from the EITC on necessities, such as car repair, children’s clothes or food. “The Earned Income Tax Credit has helped me out of a lot of jams when I have found it hard to make ends meet,” she said at today’s bill signing.
The new law also increases the $2,000 personal tax exemption by $50 and links it to federal inflation. Sponsor Sen. Toi Hutchinson said if the exemption had been indexed to inflation when the income tax was first created, the exemption would be more than $6,000 today. “That would be $24,000 for a family of four that would be untaxed — $24,000 off the top — had they been a little more progressive when they instituted the income tax in the beginning,” Hutchinson said. “Because we didn’t think that far, we’re doing it today. So, yes, it can seem insignificant right now; the point is indexing so that it keeps up with the times.”
Some Republicans traditionally opposed to new spending supported the EITC increase. “This is an opportunity to help people grab the bottom lung of the ladder, to start to get away from the dependency of welfare and get to work,” Sen. Matt Murphy of Palatine said during floor debate of the plan This is a reasonable piece of tax relief for most who get that tax credit. It’ something that I’d like to see—on both sided of the aisle—us support because it is the right thing to do.” .
But opponents of the credit, which was part of a package that also offered tax breaks to businesses threatening to leave the state, said Illinois cannot afford to hand out tax cuts. Quinn signed the corporate tax break bill late last year. The overall package is expected to cost about $300 million next fiscal year and $350 million in fiscal year 2014. According to Quinn’s budget office, the bill he signed today will cost $55 million in FY 2013 and $105 million in FY 2014. “Where will the money come from when we have $8 billion in unpaid bills, we have debt, our credit score is going down the tubes, we’re listed as the 48th worst-run state in the union? Where will the money come from?” asked Sen. Chris Lauzen, an Aurora Republican. Quinn’s own budget analysis shows that the state ending the current fiscal year with a $507 million deficit, and Moody’s Investor Services downgraded the state’s credit rating to the worst in the nation last week. Two other rating agencies did not downgrade Illinois but gave firm warnings about the possibility of future downgrades.
Quinn defended the cost of the credit today. “We can certainly afford this. It think we can’t afford not to do this. … I really think the EITC more than pays for itself in terms of economic growth and jobs.”
However, he added, “It is important that we take this year, 2012, and do some hard things when it comes to the finances for Illinois, and that begins with pension reform.” Quinn said he is willing to touch the third rail of pension reform, benefits for workers who were hired before benefit changes that went into effect last year. “Now we have to address the issues of our current employees but do it in a way that’s constitutional and fair and definitely something that involves everybody.”
Union officials maintain that changes to employee benefits hired before the pension revamp would be unconstitutional. Senate President John Cullerton has also questioned the constitutionality of such proposals.
Quinn said he wants to address growing pension costs to free up revenue for spending on education, public safety and health care. “This is a major mountain to climb this year, and I’m willing to lead the expedition,” Quinn said. “We’re going to get this done once and for all. ... For 30 years, three decades, governors and legislatures didn’t do enough. They let it go. It’s time now to tighten up and get it done.” He has formed working groups to take on the issue and wants to hear from all stakeholders involved. Quinn refused to comment on what specific changes he would support. “I think it’s important not to say what we’re going to do until everybody has a chance to speak.”
Gov. Pat Quinn today signed a tax break for low-income workers and said changes to the public employee pension systems are a top priority for him in 2012.
Quinn signed Senate Bill 400, which will increase the Earned Income Tax Credit (EITC) from 5 percent to 10 percent of the federal credit over two years. The increase will start for tax year 2012, moving it up to 7.5 percent of the federal credit, so it will not apply in the coming months as Illinoisans are filing their 2011 income tax returns.
According to Quinn about 935,000 households will benefit from the credit. He said a single mother earning $12,800 a year would save about $150 on her taxes, and a family of five with a household income of $30,000 would save about $199 this year. “It’s very important here in Illinois that we help parents raising children, parents who are working, and they are working hard and they are living from check to check every month. We want to make sure that those paychecks have enough money for the family to pay its bills and raise their children right. So that’s really our mission in Illinois, to help everyday people raising children living form paycheck to paycheck,” Quinn said today at a bill signing event.
Supporters of the increase argue that it will also help to spur local economies. “That family is not going to admire money in a bank vault, especially now. They are going to go out and spend the money in their local economy, creating jobs for local businesses in particular,” Quinn said. “There are some who think that the Earned Income Tax Credit and tax relief for working families is not part of job creation, and they’re just plain wrong.”
Rhonda Jones, a single mother who has three children in college and two more in high school, said she has often spent money from the EITC on necessities, such as car repair, children’s clothes or food. “The Earned Income Tax Credit has helped me out of a lot of jams when I have found it hard to make ends meet,” she said at today’s bill signing.
The new law also increases the $2,000 personal tax exemption by $50 and links it to federal inflation. Sponsor Sen. Toi Hutchinson said if the exemption had been indexed to inflation when the income tax was first created, the exemption would be more than $6,000 today. “That would be $24,000 for a family of four that would be untaxed — $24,000 off the top — had they been a little more progressive when they instituted the income tax in the beginning,” Hutchinson said. “Because we didn’t think that far, we’re doing it today. So, yes, it can seem insignificant right now; the point is indexing so that it keeps up with the times.”
Some Republicans traditionally opposed to new spending supported the EITC increase. “This is an opportunity to help people grab the bottom lung of the ladder, to start to get away from the dependency of welfare and get to work,” Sen. Matt Murphy of Palatine said during floor debate of the plan This is a reasonable piece of tax relief for most who get that tax credit. It’ something that I’d like to see—on both sided of the aisle—us support because it is the right thing to do.” .
But opponents of the credit, which was part of a package that also offered tax breaks to businesses threatening to leave the state, said Illinois cannot afford to hand out tax cuts. Quinn signed the corporate tax break bill late last year. The overall package is expected to cost about $300 million next fiscal year and $350 million in fiscal year 2014. According to Quinn’s budget office, the bill he signed today will cost $55 million in FY 2013 and $105 million in FY 2014. “Where will the money come from when we have $8 billion in unpaid bills, we have debt, our credit score is going down the tubes, we’re listed as the 48th worst-run state in the union? Where will the money come from?” asked Sen. Chris Lauzen, an Aurora Republican. Quinn’s own budget analysis shows that the state ending the current fiscal year with a $507 million deficit, and Moody’s Investor Services downgraded the state’s credit rating to the worst in the nation last week. Two other rating agencies did not downgrade Illinois but gave firm warnings about the possibility of future downgrades.
Quinn defended the cost of the credit today. “We can certainly afford this. It think we can’t afford not to do this. … I really think the EITC more than pays for itself in terms of economic growth and jobs.”
However, he added, “It is important that we take this year, 2012, and do some hard things when it comes to the finances for Illinois, and that begins with pension reform.” Quinn said he is willing to touch the third rail of pension reform, benefits for workers who were hired before benefit changes that went into effect last year. “Now we have to address the issues of our current employees but do it in a way that’s constitutional and fair and definitely something that involves everybody.”
Union officials maintain that changes to employee benefits hired before the pension revamp would be unconstitutional. Senate President John Cullerton has also questioned the constitutionality of such proposals.
Quinn said he wants to address growing pension costs to free up revenue for spending on education, public safety and health care. “This is a major mountain to climb this year, and I’m willing to lead the expedition,” Quinn said. “We’re going to get this done once and for all. ... For 30 years, three decades, governors and legislatures didn’t do enough. They let it go. It’s time now to tighten up and get it done.” He has formed working groups to take on the issue and wants to hear from all stakeholders involved. Quinn refused to comment on what specific changes he would support. “I think it’s important not to say what we’re going to do until everybody has a chance to speak.”
Wednesday, December 14, 2011
Lawmakers seek to roll back corporate income tax rates
By Jamey Dunn
Just a day after passing a tax break package that would benefit some businesses, House lawmakers on both sides of the aisle are pushing for a rollback of corporate portion of the recent income tax increase.
“I think people at the time of the increase of the corporate tax realized that that was not the route to go,” House Minority Leader Tom Cross said. “Business after business potentially will be coming to the state and looking for relief, and doing it on a per-company basis is not the way to go.” Under Cross’ plan, House Bill 3918, the corporate rate would drop from the current 7 percent to 6 percent in 2013 and would return to 4.8 percent, the rate before the increase, in 2014. Any unemployment rate increase of more than .3 of a percentage point over a four-month period would trigger a .25 percent reduction in the corporate tax rate as well. However, the rate could not dip below the 4.8 percent mark.
Under current law, the corporate rate will decrease to 5.25 percent in 2015 and go back to 4.8 percent in 2025.
“This bill is both measurable and meaningful to everybody. It doesn’t cut out a particular segment of businesses in the state of Illinois. It applies to everybody. So this is a way to keep jobs,” said Rep. Dwight Kay, an Edwardsville Republican. HB 3917, filed by House Democrats, would roll the tax rate back to 4.8 percent as of January. Cross said the fact that Democrats and Republicans favor a rollback on the corporate tax makes him think some version could pass in the House. “I applaud them,” Cross said of the Democrats’ measure. “We obviously support that concept and are willing to do that.”
The proposal comes the same week lawmakers approved a tax break package geared toward keeping Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, in the state. Both companies had threatened to leave. The package included an extension of tax breaks for Sears that were set to expire and a reconfiguration of the way CME’s corporate income tax bill is figured based on its electronic sales. The plan also included other business friendly provisions, such as a reinstatement of the earned operating loss tax credit, which was suspended when lawmakers approved the income tax increase last January. Business leaders supporting Cross’ proposal called the plan passed this week a “first step” toward making the state more business friendly. They say the second step is cutting tax rates for all other corporations in the state. “In January of 2011 … we advised the members of the General Assembly that the corporate tax increases that were being proposed would be a serious mistake. And indeed, we’ve had a serious backlash and an ongoing discussions about taxes all throughout the year,” said Doug Whitley, president of the Illinois Chamber of Commerce.
The tax cut package passed this week also contained breaks for individuals, including an increase to the Earned Income Tax Credit and a provision that links the personal exemption to federal cost of living increases. Such breaks helped to draw the support of many Democrats, including Gov. Pat Quinn. Individuals saw their tax rates go from 3 percent to 5 percent under the increase earlier this year. The personal rate is set to drop to 3.75 percent in 2015 and 3.25 percent in 2025. There are no tax cuts for individuals in either the House Democratic or House Republican plan to decrease the corporate income tax rate.“We’re very cognizant of the increase to individuals, and we have a bill to roll that back. But the bottom line is, unemployment continues to rise in this state … we need to provide jobs, and that’s the compassionate approach,” Cross said. Cross said it will take budget cuts to defray the cost of his plan, and that is why he is proposing a decrease that is phased in over two years. “Every point you drop the corporate tax, it’s about a $400 million hit. So we were very cognizant of the fact that we have a problem with our budget. And that’s why we drafted it in the way we did. We would of course like to see it rolled back immediately”
Senate President John Cullerton said he supports lowering the tax rate if the taxing base is broadened and the revenue coming in remains the same. He said a tax increase approved by the Senate in 2009 — which would have extended sales taxes to many services but only raised the corporate income tax to 5 percent — would have done the trick. “That provision was rejected by the House, and it did not pass. And as a result, when we negotiated the tax increase [that passed earlier this year], the corporate tax was as high as it was,” Cullerton said.
John Bouman, president of the Chicago-based Sargent Shriver National Center on Poverty Law, said the state simply cannot afford such corporate tax breaks. “I just don’t think we’re in a position in Illinois to be spending large amounts of money either on expenditures or on tax expenditures while we still owe people money, including a lot of corporate tax refunds.” He said lawmakers should view tax cuts, such as $100 million in incentives given to Sears and CME, the same way they would view spending on a program. “Even if it was justified, I just don’t think we’re at a time and place where any big expend from there can be done without offsetting with either revenues or spending cuts.” He gave the example of a group appealing to the General Assembly for $100 million in spending on programs that would benefit children in the state. “Their response would be: ‘Are you nuts? We’re in a crisis here. This might be a very worthy and fair thing to do, but we just don’t have the money.’”
Bouman — who is also a member of the Responsible Budget Coalition, which supported the income tax increase — said the state should instead focus on getting out of its budget hole and paying its billions in overdue bills. “The public supports a balanced approach to this that includes revenue and also includes spending reforms, but it requires a sustained effort on both of those … because we’re not out [of the budget hole] yet. We’re not balanced. The bills aren’t being paid.” He said HB 3917 and HB 3918 do not appear to be “aimed at any kind of coherent economic or tax policy” but are instead “pretty clearly political moves” being made by lawmakers running for reelection.
“We passed just yesterday an economic growth and tax reform measure for 2011,” said Gov. Pat Quinn. He told reporters in Chicago today that he wants to pass another tax reform package next year. However, he said that a tax break shouldn’t come at the cost of education or other core areas of government. Quinn also said that tax breaks for individuals are an important part of economic stimulus. “If you’re only going to have a corporate situation, I think you’re missing the people of Illinois … so we just can’t have it all one way. We’ve got to make sure everything is balanced for everyday people who are the heart and soul of our economy.”
Just a day after passing a tax break package that would benefit some businesses, House lawmakers on both sides of the aisle are pushing for a rollback of corporate portion of the recent income tax increase.
“I think people at the time of the increase of the corporate tax realized that that was not the route to go,” House Minority Leader Tom Cross said. “Business after business potentially will be coming to the state and looking for relief, and doing it on a per-company basis is not the way to go.” Under Cross’ plan, House Bill 3918, the corporate rate would drop from the current 7 percent to 6 percent in 2013 and would return to 4.8 percent, the rate before the increase, in 2014. Any unemployment rate increase of more than .3 of a percentage point over a four-month period would trigger a .25 percent reduction in the corporate tax rate as well. However, the rate could not dip below the 4.8 percent mark.
Under current law, the corporate rate will decrease to 5.25 percent in 2015 and go back to 4.8 percent in 2025.
“This bill is both measurable and meaningful to everybody. It doesn’t cut out a particular segment of businesses in the state of Illinois. It applies to everybody. So this is a way to keep jobs,” said Rep. Dwight Kay, an Edwardsville Republican. HB 3917, filed by House Democrats, would roll the tax rate back to 4.8 percent as of January. Cross said the fact that Democrats and Republicans favor a rollback on the corporate tax makes him think some version could pass in the House. “I applaud them,” Cross said of the Democrats’ measure. “We obviously support that concept and are willing to do that.”
The proposal comes the same week lawmakers approved a tax break package geared toward keeping Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, in the state. Both companies had threatened to leave. The package included an extension of tax breaks for Sears that were set to expire and a reconfiguration of the way CME’s corporate income tax bill is figured based on its electronic sales. The plan also included other business friendly provisions, such as a reinstatement of the earned operating loss tax credit, which was suspended when lawmakers approved the income tax increase last January. Business leaders supporting Cross’ proposal called the plan passed this week a “first step” toward making the state more business friendly. They say the second step is cutting tax rates for all other corporations in the state. “In January of 2011 … we advised the members of the General Assembly that the corporate tax increases that were being proposed would be a serious mistake. And indeed, we’ve had a serious backlash and an ongoing discussions about taxes all throughout the year,” said Doug Whitley, president of the Illinois Chamber of Commerce.
The tax cut package passed this week also contained breaks for individuals, including an increase to the Earned Income Tax Credit and a provision that links the personal exemption to federal cost of living increases. Such breaks helped to draw the support of many Democrats, including Gov. Pat Quinn. Individuals saw their tax rates go from 3 percent to 5 percent under the increase earlier this year. The personal rate is set to drop to 3.75 percent in 2015 and 3.25 percent in 2025. There are no tax cuts for individuals in either the House Democratic or House Republican plan to decrease the corporate income tax rate.“We’re very cognizant of the increase to individuals, and we have a bill to roll that back. But the bottom line is, unemployment continues to rise in this state … we need to provide jobs, and that’s the compassionate approach,” Cross said. Cross said it will take budget cuts to defray the cost of his plan, and that is why he is proposing a decrease that is phased in over two years. “Every point you drop the corporate tax, it’s about a $400 million hit. So we were very cognizant of the fact that we have a problem with our budget. And that’s why we drafted it in the way we did. We would of course like to see it rolled back immediately”
Senate President John Cullerton said he supports lowering the tax rate if the taxing base is broadened and the revenue coming in remains the same. He said a tax increase approved by the Senate in 2009 — which would have extended sales taxes to many services but only raised the corporate income tax to 5 percent — would have done the trick. “That provision was rejected by the House, and it did not pass. And as a result, when we negotiated the tax increase [that passed earlier this year], the corporate tax was as high as it was,” Cullerton said.
John Bouman, president of the Chicago-based Sargent Shriver National Center on Poverty Law, said the state simply cannot afford such corporate tax breaks. “I just don’t think we’re in a position in Illinois to be spending large amounts of money either on expenditures or on tax expenditures while we still owe people money, including a lot of corporate tax refunds.” He said lawmakers should view tax cuts, such as $100 million in incentives given to Sears and CME, the same way they would view spending on a program. “Even if it was justified, I just don’t think we’re at a time and place where any big expend from there can be done without offsetting with either revenues or spending cuts.” He gave the example of a group appealing to the General Assembly for $100 million in spending on programs that would benefit children in the state. “Their response would be: ‘Are you nuts? We’re in a crisis here. This might be a very worthy and fair thing to do, but we just don’t have the money.’”
Bouman — who is also a member of the Responsible Budget Coalition, which supported the income tax increase — said the state should instead focus on getting out of its budget hole and paying its billions in overdue bills. “The public supports a balanced approach to this that includes revenue and also includes spending reforms, but it requires a sustained effort on both of those … because we’re not out [of the budget hole] yet. We’re not balanced. The bills aren’t being paid.” He said HB 3917 and HB 3918 do not appear to be “aimed at any kind of coherent economic or tax policy” but are instead “pretty clearly political moves” being made by lawmakers running for reelection.
“We passed just yesterday an economic growth and tax reform measure for 2011,” said Gov. Pat Quinn. He told reporters in Chicago today that he wants to pass another tax reform package next year. However, he said that a tax break shouldn’t come at the cost of education or other core areas of government. Quinn also said that tax breaks for individuals are an important part of economic stimulus. “If you’re only going to have a corporate situation, I think you’re missing the people of Illinois … so we just can’t have it all one way. We’ve got to make sure everything is balanced for everyday people who are the heart and soul of our economy.”
Tuesday, December 13, 2011
Quinn to get bills giving tax breaks to companies
By Jamey Dunn
Two companies threatening to leave the state will likely stick around if Gov. Pat Quinn signs tax breaks the Illinois Senate approved today, but some lawmakers say it isn’t worth the price tag.
The Senate passed two bills today that contain a plan similar to one piece of legislation that the chamber approved two weeks ago. That bill only received eight “yes” votes in the House. “The bill was separated into two pieces to allow folks who feel pretty strongly on one or the other bill to vote their consciences,” said Sen. Toi Hutchinson, sponsor of the package.
Senate Bill 400 offers tax breaks for individuals in the form of increasing the Earned Income Tax Credit from 5 percent of the federal credit to 10 percent over two years and linking the standard exemption to federal cost of living increases. SB 397 has tax breaks for Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. Sears and the CME group both threatened to leave the state in recent months. A previously approved tax credit for Sears was set to expire. The CME Group argued that it was being taxed unfairly because its income tax bill, which is based on profits made from sales, counted all sales as taking place in Illinois, but the company makes many of its sales online to customers outside of the state. Under the plan that passed today, 27.54 percent of the company's electronic sales would be used to calculate its Illinois tax bill. The package also includes tax changes meant to help businesses throughout the state, such as an extension of a research and development credit and reinstatement of a net operating loss credit. The plan is projected to cost about $300 million next fiscal year and $350 million by fiscal year 2014.
“We are in the position right now where — yes, it’s unfortunate — there are businesses that are coming and holding us over the barrel, and I understand that that leaves a bad taste in a lot of legislators' mouths,” Hutchinson said during floor debate. But Hutchinson, an Olympia Fields Democrat, said the state cannot afford to lose the jobs those companies provide. “Every one of those people who are working live here. They pay sales taxes. They pay income taxes. … We are in a serious situation right now. We did the best we could with the negotiations we had. This is a bill that you can go home and defend.”
Opponents said that the state cannot afford the plan. Many argued that giving tax breaks to companies that threaten to leave favors big business with the means to lobby the legislature and opens the door for a rush of companies threatening to leave unless the state gives them something as well. “These special deals are bad public policy,” said Sen. Kyle McCarter, a Lebanon Republican. “This is a great bill for lobbyists, in fact maybe we can rename this bill the lobbyist dream act. Because every business in this state will and probably should line up to get their money back, and they are going to need a lobbyist.
Gov. Pat Quinn, who supports the plan, said that competing with other sates and offering tax incentives to encourage businesses to remain in the Illinois is part of the current economic climate. “Every state in the union has on the books tax incentive measures that have been passed by their legislatures to try and get jobs from other states, other businesses from other states. We just have to understand that that’s what the reality is.”
Sears has indicated that if Quinn signs the plan, it will stop shopping around for a potential move. James Parasi, chief financial officer for CME, told a House committee Monday that the passage of the plan into law would keep the CME Group in the state for years to come.
Two companies threatening to leave the state will likely stick around if Gov. Pat Quinn signs tax breaks the Illinois Senate approved today, but some lawmakers say it isn’t worth the price tag.
The Senate passed two bills today that contain a plan similar to one piece of legislation that the chamber approved two weeks ago. That bill only received eight “yes” votes in the House. “The bill was separated into two pieces to allow folks who feel pretty strongly on one or the other bill to vote their consciences,” said Sen. Toi Hutchinson, sponsor of the package.
Senate Bill 400 offers tax breaks for individuals in the form of increasing the Earned Income Tax Credit from 5 percent of the federal credit to 10 percent over two years and linking the standard exemption to federal cost of living increases. SB 397 has tax breaks for Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. Sears and the CME group both threatened to leave the state in recent months. A previously approved tax credit for Sears was set to expire. The CME Group argued that it was being taxed unfairly because its income tax bill, which is based on profits made from sales, counted all sales as taking place in Illinois, but the company makes many of its sales online to customers outside of the state. Under the plan that passed today, 27.54 percent of the company's electronic sales would be used to calculate its Illinois tax bill. The package also includes tax changes meant to help businesses throughout the state, such as an extension of a research and development credit and reinstatement of a net operating loss credit. The plan is projected to cost about $300 million next fiscal year and $350 million by fiscal year 2014.
“We are in the position right now where — yes, it’s unfortunate — there are businesses that are coming and holding us over the barrel, and I understand that that leaves a bad taste in a lot of legislators' mouths,” Hutchinson said during floor debate. But Hutchinson, an Olympia Fields Democrat, said the state cannot afford to lose the jobs those companies provide. “Every one of those people who are working live here. They pay sales taxes. They pay income taxes. … We are in a serious situation right now. We did the best we could with the negotiations we had. This is a bill that you can go home and defend.”
Opponents said that the state cannot afford the plan. Many argued that giving tax breaks to companies that threaten to leave favors big business with the means to lobby the legislature and opens the door for a rush of companies threatening to leave unless the state gives them something as well. “These special deals are bad public policy,” said Sen. Kyle McCarter, a Lebanon Republican. “This is a great bill for lobbyists, in fact maybe we can rename this bill the lobbyist dream act. Because every business in this state will and probably should line up to get their money back, and they are going to need a lobbyist.
Gov. Pat Quinn, who supports the plan, said that competing with other sates and offering tax incentives to encourage businesses to remain in the Illinois is part of the current economic climate. “Every state in the union has on the books tax incentive measures that have been passed by their legislatures to try and get jobs from other states, other businesses from other states. We just have to understand that that’s what the reality is.”
Sears has indicated that if Quinn signs the plan, it will stop shopping around for a potential move. James Parasi, chief financial officer for CME, told a House committee Monday that the passage of the plan into law would keep the CME Group in the state for years to come.
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.”
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.”
Thursday, December 08, 2011
House reaches deal on tax breaks
By Jamey Dunn
Members of the Illinois House working on a plan geared toward keeping businesses in the state say they have reached a deal.
Lawmakers returned to the Statehouse last week in hopes of passing tax breaks for Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. Legislation passed in the Senate but only received 8 “yes” votes in the House. John Bradley, sponsor of a separate House plan, announced that he would not call his bill in that chamber because he lacked to support to get it through. Senate President John Cullerton said that Bradley’s measure could not pass in the Senate.
The House and Senate plans differed in the size of tax breaks individuals would receive. The House plan would have increased the Earned Income Tax Credit from 5 percent of the federal credit to 7.5 percent, but the Senate version would have increased the credit to 10 percent over two years. The General Assembly left without approving a plan, and House Democrats and Republicans have been working to reach a deal since.
Supporters hope to have better luck when legislators return next week. “After days of carefully weighing the costs and benefits of possible proposals, [House Minority Leader Tom] Cross and I crafted a bipartisan package of tax relief that will keep jobs in Illinois, spur further investment in new products by our manufacturers and provide tax relief for families and small businesses,” Bradley, a Marion Democrat, said in a written statement.
The “deal” is very similar to the plan that passed in the Senate, but this time the plan is split into two bills. Some Republicans in the House did not support the tax cuts for individuals in the plan, and some House Democrats were unwilling to settle for the smaller individual tax breaks contained in the House proposal. Splitting the two will allow lawmakers to vote for the aspects they support without having to vote for the other portion. Cross has pledged Republican support for the business tax incentives, something he did not do for the first version of the plan. “We have come to an agreement on a jobs package that will give some relief to a broad base of businesses in our state. This package will allow businesses to plan on longer term research and development and the ability to carry their losses forward in a tough economy. It will also lessen the tax burden on our family farmers and small businesses,” he said in a prepared statement.
Champion Labs in Albion has been added to the deal. The southern Illinois manufacturer would receive a credit that would cost the state $3.5 million over 10 years. The plan also includes other tax cuts that sponsors say will help businesses across the state, such as an extension of a tax break for research and development.
After one package went down in flames last week, reactions to the current deal were guarded. “We are encouraged that they are returning to Springfield to consider a package that will help us remain an Illinois company,” Sears spokesman Chris Brathwaite said in a written statement. “We sincerely appreciate the efforts of many members of the General Assembly over the last several months on our behalf.”
Gov. Pat Quinn said he would not sign a plan unless is contained “significant relief for working families.” He did support the Senate proposal, and the new agreement includes the larger increase to the Earned Income Tax Credit — 10 percent over 10 years.
It seems unlikely that Quinn would sign the business tax breaks bill unless the measure including the individual tax cuts also makes in to his desk.“The governor is very encouraged with the bipartisan agreement reached in the House. Before veto session, we brought the leaders to the table with the goal of delivering economic growth and tax reform that would provide relief to working families and help employers put more people to work,” Brooke Anderson, a spokesperson for Quinn, said in a written statement. “As we head into Monday's session, we'll continue working closely with the leaders and sponsors to get the job done. A spokesperson for Cullerton said the president’s staff is still reviewing the new bills.
The House is scheduled to return to Springfield on Monday, and the Senate plans to be back in session on Tuesday.
Members of the Illinois House working on a plan geared toward keeping businesses in the state say they have reached a deal.
Lawmakers returned to the Statehouse last week in hopes of passing tax breaks for Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. Legislation passed in the Senate but only received 8 “yes” votes in the House. John Bradley, sponsor of a separate House plan, announced that he would not call his bill in that chamber because he lacked to support to get it through. Senate President John Cullerton said that Bradley’s measure could not pass in the Senate.
The House and Senate plans differed in the size of tax breaks individuals would receive. The House plan would have increased the Earned Income Tax Credit from 5 percent of the federal credit to 7.5 percent, but the Senate version would have increased the credit to 10 percent over two years. The General Assembly left without approving a plan, and House Democrats and Republicans have been working to reach a deal since.
Supporters hope to have better luck when legislators return next week. “After days of carefully weighing the costs and benefits of possible proposals, [House Minority Leader Tom] Cross and I crafted a bipartisan package of tax relief that will keep jobs in Illinois, spur further investment in new products by our manufacturers and provide tax relief for families and small businesses,” Bradley, a Marion Democrat, said in a written statement.
The “deal” is very similar to the plan that passed in the Senate, but this time the plan is split into two bills. Some Republicans in the House did not support the tax cuts for individuals in the plan, and some House Democrats were unwilling to settle for the smaller individual tax breaks contained in the House proposal. Splitting the two will allow lawmakers to vote for the aspects they support without having to vote for the other portion. Cross has pledged Republican support for the business tax incentives, something he did not do for the first version of the plan. “We have come to an agreement on a jobs package that will give some relief to a broad base of businesses in our state. This package will allow businesses to plan on longer term research and development and the ability to carry their losses forward in a tough economy. It will also lessen the tax burden on our family farmers and small businesses,” he said in a prepared statement.
Champion Labs in Albion has been added to the deal. The southern Illinois manufacturer would receive a credit that would cost the state $3.5 million over 10 years. The plan also includes other tax cuts that sponsors say will help businesses across the state, such as an extension of a tax break for research and development.
After one package went down in flames last week, reactions to the current deal were guarded. “We are encouraged that they are returning to Springfield to consider a package that will help us remain an Illinois company,” Sears spokesman Chris Brathwaite said in a written statement. “We sincerely appreciate the efforts of many members of the General Assembly over the last several months on our behalf.”
Gov. Pat Quinn said he would not sign a plan unless is contained “significant relief for working families.” He did support the Senate proposal, and the new agreement includes the larger increase to the Earned Income Tax Credit — 10 percent over 10 years.
It seems unlikely that Quinn would sign the business tax breaks bill unless the measure including the individual tax cuts also makes in to his desk.“The governor is very encouraged with the bipartisan agreement reached in the House. Before veto session, we brought the leaders to the table with the goal of delivering economic growth and tax reform that would provide relief to working families and help employers put more people to work,” Brooke Anderson, a spokesperson for Quinn, said in a written statement. “As we head into Monday's session, we'll continue working closely with the leaders and sponsors to get the job done. A spokesperson for Cullerton said the president’s staff is still reviewing the new bills.
The House is scheduled to return to Springfield on Monday, and the Senate plans to be back in session on Tuesday.
Monday, November 28, 2011
Lawmakers look at public campaign financing and corporate tax breaks
By Jamey Dunn
Illinois lawmakers might approve tax cuts to help keep businesses in the state, but they apparently are a long way off from shelling out state dollars to finance political races.
A task force created under the law that set campaign donation limits in Illinois is delving into other potential campaign finance reforms. Today during a legislative hearing, the group looked at public funding of campaigns.
Rep. Elaine Nekritz, a Northbrook Democrat, told the task force that she doesn’t think the recently enacted contribution limits will change much in the state. “While I voted for the campaign [contribution] limits … I don’t really think that they do anything to take money out of campaigns, and out of politics, and out of influence of government. So, I would say, ‘Yes, we did that.’ But that’s been done since the 1970s at the federal level, and I don’t see anything that’s removed the influence of money or reduced the amount of expenditures on campaigns on the federal level,” she said. “So I don’t think that there’s any need to wait to see what the impact will be in the state of Illinois.”
Nekrtiz said that she supports spending limits. However, she said “the U.S. Supreme Court is not headed in that direction. So we have to find an alternate method to get that done, and I think the next best thing is to create incentives for candidates to control spending.”
She said that during the current budget crisis, money is probably too tight for the state to offer public funds to political candidates. But she said lawmakers should have a plan for when the state is on better financial footing. “It’s critical that we have the dialogue and be prepared [for] such time as we can come up with a source of funding for public financing.”
However, Kent Redfield, an emeritus political science professor at the University of Illinois Springfield, said any plan to publicly fund governor or General Assembly races would not find enough support to become a reality. “If you are trying to get a system to substitute public money for private money, I don’t think there’s a political will to do that. The cost is just way too high, and I’m not even sure that it’s good public policy to try and do that. You’d be spending so much money to affect a very small number of races, and the rest of it would be going to people who were either going to lose or win regardless of how much money was there.” Redfield said many candidates in close races likely would not take public funds because then they would be tied to a set amount of spending. “There are states that finance their gubernatorial races through public finance, and there’s longstanding traditions, and it would be really bad form not to take the money. They tend to be smaller states where it’s a lot cheaper to run. But to institute that kind of system in Illinois would be very difficult.”
The federal government offers public funding for presidential races, and at least a dozen states have some sort of public funding system for elected offices.
Redfield said that instead, Illinois should offer smaller grants to candidates who raise money from small contributions, which often come from private citizens. Redfield said such grants would “encourage candidates to raise money in small amounts and provide resources for people who otherwise would not be able to run.”
He added, “Those are positive things for the system, but they’re not game changes in terms of who control the House or the Senate.”
Redfield did advocate for public funding for judicial races, saying that the state’s judiciary may have “crisis of credibility” in its future. “The more that you get big private interests that are interested in the outcome of a judicial decision engaged in political campaigns, the more you’re going to call the independence of the judiciary into question, and that’s very corrosive. If people don’t accept the legitimacy of the courts, the foundation of the whole system is gone.”
Meanwhile, the House Revenue and Finance Committee approved a plan today that is geared at keeping two businesses in the state.
Senate Bill 397 would offer about $100 million in tax breaks to the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, and Sears, both of which have recently threatened to leave the state. Other breaks meant to benefit the business community at large, such as an extension of the research and development tax credit, are also in the bill.
The plan also includes an increase to the earned income tax credit and a $50 bump in the personal income tax exemption. The proposal would cost an estimated $250 million annually, which is scaled back from a plan floated last week that would have eventually cost the state about $850 million a year. A vote on the package is expected in the House tomorrow.
Illinois lawmakers might approve tax cuts to help keep businesses in the state, but they apparently are a long way off from shelling out state dollars to finance political races.
A task force created under the law that set campaign donation limits in Illinois is delving into other potential campaign finance reforms. Today during a legislative hearing, the group looked at public funding of campaigns.
Rep. Elaine Nekritz, a Northbrook Democrat, told the task force that she doesn’t think the recently enacted contribution limits will change much in the state. “While I voted for the campaign [contribution] limits … I don’t really think that they do anything to take money out of campaigns, and out of politics, and out of influence of government. So, I would say, ‘Yes, we did that.’ But that’s been done since the 1970s at the federal level, and I don’t see anything that’s removed the influence of money or reduced the amount of expenditures on campaigns on the federal level,” she said. “So I don’t think that there’s any need to wait to see what the impact will be in the state of Illinois.”
Nekrtiz said that she supports spending limits. However, she said “the U.S. Supreme Court is not headed in that direction. So we have to find an alternate method to get that done, and I think the next best thing is to create incentives for candidates to control spending.”
She said that during the current budget crisis, money is probably too tight for the state to offer public funds to political candidates. But she said lawmakers should have a plan for when the state is on better financial footing. “It’s critical that we have the dialogue and be prepared [for] such time as we can come up with a source of funding for public financing.”
However, Kent Redfield, an emeritus political science professor at the University of Illinois Springfield, said any plan to publicly fund governor or General Assembly races would not find enough support to become a reality. “If you are trying to get a system to substitute public money for private money, I don’t think there’s a political will to do that. The cost is just way too high, and I’m not even sure that it’s good public policy to try and do that. You’d be spending so much money to affect a very small number of races, and the rest of it would be going to people who were either going to lose or win regardless of how much money was there.” Redfield said many candidates in close races likely would not take public funds because then they would be tied to a set amount of spending. “There are states that finance their gubernatorial races through public finance, and there’s longstanding traditions, and it would be really bad form not to take the money. They tend to be smaller states where it’s a lot cheaper to run. But to institute that kind of system in Illinois would be very difficult.”
The federal government offers public funding for presidential races, and at least a dozen states have some sort of public funding system for elected offices.
Redfield said that instead, Illinois should offer smaller grants to candidates who raise money from small contributions, which often come from private citizens. Redfield said such grants would “encourage candidates to raise money in small amounts and provide resources for people who otherwise would not be able to run.”
He added, “Those are positive things for the system, but they’re not game changes in terms of who control the House or the Senate.”
Redfield did advocate for public funding for judicial races, saying that the state’s judiciary may have “crisis of credibility” in its future. “The more that you get big private interests that are interested in the outcome of a judicial decision engaged in political campaigns, the more you’re going to call the independence of the judiciary into question, and that’s very corrosive. If people don’t accept the legitimacy of the courts, the foundation of the whole system is gone.”
Meanwhile, the House Revenue and Finance Committee approved a plan today that is geared at keeping two businesses in the state.
Senate Bill 397 would offer about $100 million in tax breaks to the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, and Sears, both of which have recently threatened to leave the state. Other breaks meant to benefit the business community at large, such as an extension of the research and development tax credit, are also in the bill.
The plan also includes an increase to the earned income tax credit and a $50 bump in the personal income tax exemption. The proposal would cost an estimated $250 million annually, which is scaled back from a plan floated last week that would have eventually cost the state about $850 million a year. A vote on the package is expected in the House tomorrow.
Wednesday, November 16, 2011
Several tax breaks are on the table
By Jamey Dunn
Illinois lawmakers took a look at ways to change tax policy in the state as part of a package to keep companies that have threatened to leave.
Threats to leave the state from the CME group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, spurred work on a package that could offer tax relief to CME, other businesses and Illinois families.
Lawmakers are considering a number of tax tweaks meant to spur economic growth, including:
The plan would be paid for in part by decoupling from a federal tax incentive meant to encourage businesses to buy equipment. The plan allows businesses to deduct more of the costs of such purchases upfront, instead of spreading it out over several years. Illinois links its practices to the federal tax code, but if it were to “decouple” from the feds on this policy, the Department of Revenue estimates that it would mean an additional $571 million in revenue for Fiscal Year 2012, and another $354 million next fiscal year. These estimates are based on applying a decoupling retroactively back to January.
Many who testified today at committee hearing on the package said that such a retroactive action would be unfair to businesses that bought equipment under the current rules. John Stevens—owner of Stevens Implement Company, a John Deere dealership in Petersburg— said his sales have gone up 10 percent in the last year, and the increase has allowed him to hire more staff. The tax incentive, known as bonus depreciation, is “one of the major reasons we have seen our sales increase in 2011.”
Stevens said the change would pull the rug out from under companies that have made large purchases in “good faith” under the bonus depreciation plan. “Large investments like this must be planned well in advance to engineer, schedule and finance while considering all tax implications.”
Creating a package that can pass will be a difficult task. Legislators on both sides of the aisle support the idea of making some tax changes to spur the economy, but opinions differ on what is needed. Senate President John Cullerton introduced a plan that only targets exchanges, such as CME. Many Republicans did not support the measure, saying it was unfair to help out one large business when many small companies are struggling. Gov. Pat Quinn has backed an increase to the Earned Income Tax Credit since lawmakers were weighing tax increase options shortly after he took office. However, all of these tax breaks will suck up precious revenue in a time when the state is making cuts to education, human services and politically popular programs. The difficulty in weighing all these considerations likely played a part in the issue being pushed out of the regular veto session and into some specially scheduled session time later this month. Another hearing is scheduled on Friday, and the full House is scheduled to return to Springfield to take up a plan on November 29.
For more on the businesses lobbying the General Assembly, see the current Illinois Issues.
Illinois lawmakers took a look at ways to change tax policy in the state as part of a package to keep companies that have threatened to leave.
Threats to leave the state from the CME group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, spurred work on a package that could offer tax relief to CME, other businesses and Illinois families.
Lawmakers are considering a number of tax tweaks meant to spur economic growth, including:
- Changing the way the state calculates the tax bill for CME and other exchanges in the state by reducing the percentage of sales that are taxable. Currently, CME’s income tax is calculated based on all of its sales even though online trading leads to many of the sales going to customers outside Illinois The Illinois Department of Revenue estimates that this change would cost the state about $85 million in revenue.
- Extending the research and development tax credit. The Department of Revenue estimates that this would cost about $40 million a year.
- Increasing the Earned Income Tax Credit for working families from 5 percent of the federal credit to 15 percent over two years. According to the Department of Revenue, the increase would cost about $112 million annually.The department estimates 900,000 households or 2.5 million residents would benefit from the credit.
- Reinstating the Net Operating Loss Credit that allows businesses to write off losses. It was temporarily removed under the tax increase passed in January. The Department of Revenue estimates that this would eat up about $275 million each year.
- Reducing to $100 the fees companies must pay to become corporations, which can range from $500 to $750. The change would cost about $12 million in state and local revenue.
The plan would be paid for in part by decoupling from a federal tax incentive meant to encourage businesses to buy equipment. The plan allows businesses to deduct more of the costs of such purchases upfront, instead of spreading it out over several years. Illinois links its practices to the federal tax code, but if it were to “decouple” from the feds on this policy, the Department of Revenue estimates that it would mean an additional $571 million in revenue for Fiscal Year 2012, and another $354 million next fiscal year. These estimates are based on applying a decoupling retroactively back to January.
Many who testified today at committee hearing on the package said that such a retroactive action would be unfair to businesses that bought equipment under the current rules. John Stevens—owner of Stevens Implement Company, a John Deere dealership in Petersburg— said his sales have gone up 10 percent in the last year, and the increase has allowed him to hire more staff. The tax incentive, known as bonus depreciation, is “one of the major reasons we have seen our sales increase in 2011.”
Stevens said the change would pull the rug out from under companies that have made large purchases in “good faith” under the bonus depreciation plan. “Large investments like this must be planned well in advance to engineer, schedule and finance while considering all tax implications.”
Creating a package that can pass will be a difficult task. Legislators on both sides of the aisle support the idea of making some tax changes to spur the economy, but opinions differ on what is needed. Senate President John Cullerton introduced a plan that only targets exchanges, such as CME. Many Republicans did not support the measure, saying it was unfair to help out one large business when many small companies are struggling. Gov. Pat Quinn has backed an increase to the Earned Income Tax Credit since lawmakers were weighing tax increase options shortly after he took office. However, all of these tax breaks will suck up precious revenue in a time when the state is making cuts to education, human services and politically popular programs. The difficulty in weighing all these considerations likely played a part in the issue being pushed out of the regular veto session and into some specially scheduled session time later this month. Another hearing is scheduled on Friday, and the full House is scheduled to return to Springfield to take up a plan on November 29.
For more on the businesses lobbying the General Assembly, see the current Illinois Issues.
Thursday, June 23, 2011
State says couples in civil unions
can't file joint Illinois tax returns
By Jamey Dunn
Less than a month after civil unions became available in Illinois, one state agency says it cannot allow for a benefit that lawmakers promised would come along with the partnerships.
The Illinois Department of Revenue says it will not allow couples in civil unions to file joint state income tax returns because Illinois residents must file the state return the same way they file their federal one, and the federal government does not recognize civil unions. Married couples who file separate federal returns must file their state taxes separately. However, married couples not required to file a federal return can file a joint Illinois return. An explanation of the policy on the department’s website cites the federal Defense of Marriage Act, which President Barack Obama’s administration has said it will no longer defend against legal challenges.
Chicago Democratic state Rep. Greg Harris, who sponsored legislation that legalized civil unions in the state, said the Department of Revenue’s decision came as a surprise. He says lawmakers intended for couples entering into civil unions to be afforded all the same rights and obligations that the state gives to married people, including filing a tax return together. “On the face of it, it seems to contradict the intentions of the legislature. … The lawmakers in debates in discussion of this bill explicitly said it [would allow couples to file joint state tax returns,]” said Bernard Cherkasov, chief executive officer of the advocacy group Equality Illinois.
“I think they’re taking the easy way out,” said Jill Metz, president of the American Civil Liberties Union of Illinois' board of directors. “Other states have disagreed with their position that they have to stay in line with the federal tax policy.” Other states that have civil unions or domestic partnerships, such as California and New Jersey, do allow couples to file joint state returns. Metz said in such states, couples create a joint federal return that they do not file, but they use the joint income number calculation to plug into their state returns. The Illinois Department of Revenue maintains that there isn’t a monetary benefit to filing as a couple on the state level. “Illinois has flat tax, and so whether you are single or married, you will pay the same amount of tax,” said Sue Hofer, a department spokeswoman.
“I don’t know how the state of Illinois could possible know all the circumstances of people’s lives to know whether there is or isn’t a benefit to filing a joint state tax return,”Metz said. Anthony Madonia, an adjunct professor at the John Marshall Law School in Chicago, said there are some potential benefits to filing state taxes as a couple. “There’s no ladder to climb as far as rates go. … I guess the difference is, if one of the members of the civil union is not working, then their exemption is wasted.” He said if someone did not have income, they could apply their personal tax exemption, as well as other potential exemptions, to their partner’s income.
“Prior to this, we were planning on filing joint returns for clients who are in civil unions,” said Madonia, His Chicago-based firm, Anthony J. Madonia & Associates, focuses on tax and business law. “We thought that there would be a joint return. We just did.”
Metz said many people are willing to take an extra step to calculate their combined income as if they were filing a federal return, so they can put the number on their state forms and file as a couple, regardless of the benefits. “It’s about the recognition. It’s about the inclusiveness. It’s about the respect,” she said.
Harris said that the department’s argument illustrates the need to overturn the federal Defense of Marriage Act. He said until the federal government recognizes the unions of same-sex couples, legal disputes such as this one will continue to pop up across the country. “This just shows why we still have such a long way to go in terms of marriage equality in this country.”
Harris said he hopes the issue can be resolved, but he said it might take a lawsuit against the state from a couple in a civil union. “I look forward to somebody filing it.”
Cherkasov and Metz both say their organizations are looking into ways the department could allow couples to file together. Metz called on the department to rethink its policy to avoid lawsuits. “They could make the right decision and keep the promise that is in that civil unions bill. … I think somebody in the Illinois Department of Revenue needs to take a second look.”
Cherkasov said there is still time to ensure that couples in civil unions can file their first joint state tax returns next year. “It’s alarming that this is their opinion. … But at the same time, the 2011 tax returns for the state of Illinois have not been printed yet.”
An analysis of the department's decision from John Marshall Law School assistant professor Anthony Niedwiecki is available here.
Less than a month after civil unions became available in Illinois, one state agency says it cannot allow for a benefit that lawmakers promised would come along with the partnerships.
The Illinois Department of Revenue says it will not allow couples in civil unions to file joint state income tax returns because Illinois residents must file the state return the same way they file their federal one, and the federal government does not recognize civil unions. Married couples who file separate federal returns must file their state taxes separately. However, married couples not required to file a federal return can file a joint Illinois return. An explanation of the policy on the department’s website cites the federal Defense of Marriage Act, which President Barack Obama’s administration has said it will no longer defend against legal challenges.
Chicago Democratic state Rep. Greg Harris, who sponsored legislation that legalized civil unions in the state, said the Department of Revenue’s decision came as a surprise. He says lawmakers intended for couples entering into civil unions to be afforded all the same rights and obligations that the state gives to married people, including filing a tax return together. “On the face of it, it seems to contradict the intentions of the legislature. … The lawmakers in debates in discussion of this bill explicitly said it [would allow couples to file joint state tax returns,]” said Bernard Cherkasov, chief executive officer of the advocacy group Equality Illinois.
“I think they’re taking the easy way out,” said Jill Metz, president of the American Civil Liberties Union of Illinois' board of directors. “Other states have disagreed with their position that they have to stay in line with the federal tax policy.” Other states that have civil unions or domestic partnerships, such as California and New Jersey, do allow couples to file joint state returns. Metz said in such states, couples create a joint federal return that they do not file, but they use the joint income number calculation to plug into their state returns. The Illinois Department of Revenue maintains that there isn’t a monetary benefit to filing as a couple on the state level. “Illinois has flat tax, and so whether you are single or married, you will pay the same amount of tax,” said Sue Hofer, a department spokeswoman.
“I don’t know how the state of Illinois could possible know all the circumstances of people’s lives to know whether there is or isn’t a benefit to filing a joint state tax return,”Metz said. Anthony Madonia, an adjunct professor at the John Marshall Law School in Chicago, said there are some potential benefits to filing state taxes as a couple. “There’s no ladder to climb as far as rates go. … I guess the difference is, if one of the members of the civil union is not working, then their exemption is wasted.” He said if someone did not have income, they could apply their personal tax exemption, as well as other potential exemptions, to their partner’s income.
“Prior to this, we were planning on filing joint returns for clients who are in civil unions,” said Madonia, His Chicago-based firm, Anthony J. Madonia & Associates, focuses on tax and business law. “We thought that there would be a joint return. We just did.”
Metz said many people are willing to take an extra step to calculate their combined income as if they were filing a federal return, so they can put the number on their state forms and file as a couple, regardless of the benefits. “It’s about the recognition. It’s about the inclusiveness. It’s about the respect,” she said.
Harris said that the department’s argument illustrates the need to overturn the federal Defense of Marriage Act. He said until the federal government recognizes the unions of same-sex couples, legal disputes such as this one will continue to pop up across the country. “This just shows why we still have such a long way to go in terms of marriage equality in this country.”
Harris said he hopes the issue can be resolved, but he said it might take a lawsuit against the state from a couple in a civil union. “I look forward to somebody filing it.”
Cherkasov and Metz both say their organizations are looking into ways the department could allow couples to file together. Metz called on the department to rethink its policy to avoid lawsuits. “They could make the right decision and keep the promise that is in that civil unions bill. … I think somebody in the Illinois Department of Revenue needs to take a second look.”
Cherkasov said there is still time to ensure that couples in civil unions can file their first joint state tax returns next year. “It’s alarming that this is their opinion. … But at the same time, the 2011 tax returns for the state of Illinois have not been printed yet.”
An analysis of the department's decision from John Marshall Law School assistant professor Anthony Niedwiecki is available here.
Tuesday, March 01, 2011
Federal tax break could put hole in Quinn's budget
By Jamey Dunn
Gov. Pat Quinn’s proposed budget counts on a move to decouple state tax code from a federal plan to spur businesses to spend more on equipment. Illinois could stand to lose more than $1 billion if it stays in step with the feds on the tax benefit for businesses, according to a study released today.
The federal provision is part of a compromise between President Barack Obama and Republican members of Congress to extend income tax cuts enacted by President George W. Bush. The provision allows businesses to deduct the entire costs of spending on items such as machinery and equipment from September 8, 2010, to December 31, 2011, all at once on their federal tax returns. Without the benefit, companies would have to spread those tax deductions over several years, a practice known as “depreciating.”
Under the compromise, businesses can then deduct half of the cost of spending for those items during calendar year 2012 and spread out the remaining cost over the usual “depreciation” schedule.
The federal provision is an extension and expansion of a plan approved in 2008 that was scheduled to sunset in 2010. Because Illinois' income tax code falls in line with federal code, businesses also would be able to take similar deductions on their state tax returns during the same time frame.
A study from the Washington-D.C.-based Center on Budget and Policy Priorities took a look at how much revenue states could miss out on due to the tax break at a time when many are facing deficits. The group estimates 19 states — including Illinois — that link their practices to federal tax provisions would lose a total of $5.3 billion under the extended plan. According to the center’s projections, Illinois could potentially lose the most, with an estimated hit of more than $1 billion. A spokesperson for Quinn’s budget office estimates the state would lose between $50 million to $100 million in fiscal year 2011 and $520 million to $615 in fiscal year 2012. Kraft said there would be a loss in fiscal year 2013 as well, but the office does not have estimates on it yet. She added that Quinn’s administration is drafting legislation to split the state from the federal practices on the issue.
Mark Denzler, vice president of government affairs for the Illinois Manufacturers Association, said the center’s revenue estimates are inflated. “It would be nowhere close to that.” He said the temporary change to the way businesses deduct capital spending was put in place after the terrorist attacks on September 11, 2001, to help spur the sluggish economy by encouraging businesses to expand their operations. Denzler said Obama extended the measure because he realizes how important it is in the current economic downturn, and states should recognize that, too. “We would just be continuing the current practice of what Illinois has been doing for almost a decade now,” Denzler said. He added that states would not lose money in the long run because companies would still be able to write off the purchases on their taxes without the change. However, the tax benefits to businesses, and the cost to the state, would be spread over several years if the state did not go along with the feds.
Nicholas Johnson, who co-authored the study for the center, said most federal lawmakers probably didn’t consider the impact on states when they extended the change. He added that they likely had “no expectations” that the states would do it, too.
On the day of the budget address, House Speaker Michael Madigan took issue with Quinn estimating revenue in his budget proposal based on the assumption that the legislature would pass a bill to end the accelerated tax bonus in Illinois. Madigan spokesman Steve Brown said Quinn’s move went against recently enacted proposals to reform the budgeting process in Illinois, including requiring budgets to be based on the revenue available at the time they are created. “On day one [of the budgeting process], we were not off to a good start,” Brown said.
Gov. Pat Quinn’s proposed budget counts on a move to decouple state tax code from a federal plan to spur businesses to spend more on equipment. Illinois could stand to lose more than $1 billion if it stays in step with the feds on the tax benefit for businesses, according to a study released today.
The federal provision is part of a compromise between President Barack Obama and Republican members of Congress to extend income tax cuts enacted by President George W. Bush. The provision allows businesses to deduct the entire costs of spending on items such as machinery and equipment from September 8, 2010, to December 31, 2011, all at once on their federal tax returns. Without the benefit, companies would have to spread those tax deductions over several years, a practice known as “depreciating.”
Under the compromise, businesses can then deduct half of the cost of spending for those items during calendar year 2012 and spread out the remaining cost over the usual “depreciation” schedule.
The federal provision is an extension and expansion of a plan approved in 2008 that was scheduled to sunset in 2010. Because Illinois' income tax code falls in line with federal code, businesses also would be able to take similar deductions on their state tax returns during the same time frame.
A study from the Washington-D.C.-based Center on Budget and Policy Priorities took a look at how much revenue states could miss out on due to the tax break at a time when many are facing deficits. The group estimates 19 states — including Illinois — that link their practices to federal tax provisions would lose a total of $5.3 billion under the extended plan. According to the center’s projections, Illinois could potentially lose the most, with an estimated hit of more than $1 billion. A spokesperson for Quinn’s budget office estimates the state would lose between $50 million to $100 million in fiscal year 2011 and $520 million to $615 in fiscal year 2012. Kraft said there would be a loss in fiscal year 2013 as well, but the office does not have estimates on it yet. She added that Quinn’s administration is drafting legislation to split the state from the federal practices on the issue.
Mark Denzler, vice president of government affairs for the Illinois Manufacturers Association, said the center’s revenue estimates are inflated. “It would be nowhere close to that.” He said the temporary change to the way businesses deduct capital spending was put in place after the terrorist attacks on September 11, 2001, to help spur the sluggish economy by encouraging businesses to expand their operations. Denzler said Obama extended the measure because he realizes how important it is in the current economic downturn, and states should recognize that, too. “We would just be continuing the current practice of what Illinois has been doing for almost a decade now,” Denzler said. He added that states would not lose money in the long run because companies would still be able to write off the purchases on their taxes without the change. However, the tax benefits to businesses, and the cost to the state, would be spread over several years if the state did not go along with the feds.
Nicholas Johnson, who co-authored the study for the center, said most federal lawmakers probably didn’t consider the impact on states when they extended the change. He added that they likely had “no expectations” that the states would do it, too.
On the day of the budget address, House Speaker Michael Madigan took issue with Quinn estimating revenue in his budget proposal based on the assumption that the legislature would pass a bill to end the accelerated tax bonus in Illinois. Madigan spokesman Steve Brown said Quinn’s move went against recently enacted proposals to reform the budgeting process in Illinois, including requiring budgets to be based on the revenue available at the time they are created. “On day one [of the budgeting process], we were not off to a good start,” Brown said.
Wednesday, January 12, 2011
Legislators pass a tax increase in the final hours of session
By Jamey Dunn with Lauren Johnson contributing
Illinois lawmakers passed an income tax increase before adjourning their two-year legislative session but failed to approve other pieces of a budget plan intended to quickly pay down the state’s backlog of bills and funnel new funding to education.
Chicago Democratic Rep. Barbara Flynn Currie said the time to point fingers about the deficit has passed. “Illinois is in crisis — absolute financial crisis — and there is no way we can dig ourselves out of the crisis without enhanced revenues.”
Currie, sponsor of Senate Bill 2505 added: “This mess is a mess that is the responsibility of all of us. … It’s too late. It’s time for us to be adults, face the crisis and figure out together a solution.”
However, Rep. Roger Eddy, a Hutsonville Republican, said that GOP calls for spending cuts have been ignored for years. “The time to be adults was eight years ago, when we were expanding programs,” he said.
Currie said that without the tax increase, lawmakers would have to make “wholesale” cuts to state government.
Speaker Mike Madigan has vowed on multiple occasions that an income tax increase would not pass in the House without Republican support, but in the end, that is what happened. Senate Bill 2505 passed with the 60 required “yes” votes to 57 opposition votes.
“They're on the sidelines. They don't want to get on the field of play,” Madigan said about Republicans after the vote.
The personal income tax would increase from 3 percent to 5 percent, and the corporate tax would go from 4.8 percent to 7 percent. Under the legislation, both rates would drop after four years, to 3.75 percent for personal income tax and to 5.25 percent for the corporate income tax. The plan is expected to bring in roughly $6.5 billion in its first year.
Currie estimated that a family of four with an income of $40,000 would pay roughly $800 more a year under the initial increase.
The measure also includes spending caps for the next four fiscal years. The limits would be $36.8 billion in Fiscal Year 2012, $37.5 billion in FY 2013, $38.3 billion in FY 2014 and $39.1 billion in FY 2015. If the legislators spend more, the tax increases would be nullified. It would be up to the Illinois auditor general to determine if the state has overspent. House Democrats described that provision as the “hammer” that will keep future budgeting in line. Both legislative chambers changed their rules to require a three-fifths vote on any legislation that increases the spending limits.
Democrats described those spending increases as lower than the rate of inflation. However, Republicans took issue with the Democrats' initial numbers, on which the structure is based.
Sen. Dale Righter, a Mattoon Republican, called the caps an “ill-fitting theater costume” used to dress up a tax increase to make it seem fiscally responsible.
House Minority Leader Tom Cross said he could not support locking in any increase to the future budget. He said Democrats should work with Republicans to find an appropriate spending level and stick to it while the state tries to make its way out of its budget hole. “Whatever that is, you need to stabilize that number — and that’s the point — instead of growing the number.”
Senate President John Cullerton said that without the tax increase, the future of Illinois and those waiting on state payments, such as human service providers, would be dire. “If we don’t do this … the people who would be waiting to be paid would wait for years to be paid, if they even continue to do business with us.”
Republican Sen. Matt Murphy of Palatine said legislators who voted for the tax increase could no longer claim that job creation is their top priority. “Your number one priority is supporting state spending at or above the current level. … because there is no question there will be job loss with this tax increase.”
However, Sen. Dan Kotowski, a Park Ridge Democrat, said failing to approve new revenue to properly fund the state budget would result in the loss of hundreds of thousands of jobs.
The Senate approved nearly $4 billion in borrowing — to be paid off over eight years — to cover the required payment to public employee pension systems for this fiscal year.
Righter questioned why Illinois needed to borrow after raising the income tax. Cullerton said borrowing was necessary so the state could afford to make the pension payment for this fiscal year. “The money that we raised with the income tax is going to start paying the pension payment for the next fiscal year.”
He added that the General Assembly also extended the emergency budget powers given to Gov. Pat Quinn as part of last spring’s budget bill. Those powers — originally granted for six months but now extended through June 30, the end of the current fiscal year — allowed Quinn to make cuts and allocate lump-sum appropriations the General Assembly sent him in lieu of a line-item budget.
“This bill effectively, for budget purposes, crowns the governor king,” Murphy said.
Currie removed from the bill a “property tax relief” provision that would have provided equal annual rebate checks to property tax payers across Illinois. Republicans complained that it was unfair to give someone who pays a higher level of property taxes the same amount of relief as someone who pays less. Cullerton estimated that the checks for next year would have been about $325.
Two other components to the overall proposed plan failed to clear the House.
Lawmakers in that chamber shot down a $1-a-pack cigarette tax that would have brought in an estimated $370 million for education. That caused a temporary hitch for the income tax increase in the Senate, where some Democrats were disappointed with the lack of new education funds.
Maywood Democratic Sen. Kimberly Lightford said those with concerns, including members of the Senate Black Caucus, we’re promised that the $250 million in revenues that will no longer be needed for property tax relief will go toward education.
She said after the potential revenue sources of the cigarette tax increase and a proposed gaming expansion failed to get support, “we felt like the commitment for education funding was not there.” Lightford said members of her caucus called on Democratic leadership and Gov. Pat Quinn to find money for schools. “You didn’t pass a cigarette tax; didn’t call gaming. You need to put that 250 to education,” she said.
Lightford said $250 million a year for the first four years of the tax increase would go into a fund that would specifically target underperforming schools. Quinn later said of the deal: “Many [of the Black Caucus members] are my friends, and we worked together in campaigns. We believe in working together on important things that help children.”
A plan to borrow $8.75 billion to pay down the state’s backlog of unpaid bills for this fiscal year also failed to get the 71 votes it needed to pass. The loan would have been repaid over 14 years. Spring Valley Democratic Rep. Frank Mautino, sponsor of SB 336, said if the measure had passed, the state could have started to send out checks to schools, providers and vendors in March.
Cross said he is still willing to negotiate with Democrats on a borrowing plan to pay off the bills but said it would have to be smaller and come in tandem with cuts and reforms, such as changes to workers’ compensation. The workers compensation efforts in the lame-duck legislative session fell short, but Cullerton called the issue a “top priority” for the new session, which begins later today.
Gaming expansion and medical marijuana measures that came up for votes in the waning days of the two-year session both died upon adjournment, along with the borrowing plan, workers’ compensation reform and the cigarette tax increase.
Illinois lawmakers passed an income tax increase before adjourning their two-year legislative session but failed to approve other pieces of a budget plan intended to quickly pay down the state’s backlog of bills and funnel new funding to education.
Chicago Democratic Rep. Barbara Flynn Currie said the time to point fingers about the deficit has passed. “Illinois is in crisis — absolute financial crisis — and there is no way we can dig ourselves out of the crisis without enhanced revenues.”
Currie, sponsor of Senate Bill 2505 added: “This mess is a mess that is the responsibility of all of us. … It’s too late. It’s time for us to be adults, face the crisis and figure out together a solution.”
However, Rep. Roger Eddy, a Hutsonville Republican, said that GOP calls for spending cuts have been ignored for years. “The time to be adults was eight years ago, when we were expanding programs,” he said.
Currie said that without the tax increase, lawmakers would have to make “wholesale” cuts to state government.
Speaker Mike Madigan has vowed on multiple occasions that an income tax increase would not pass in the House without Republican support, but in the end, that is what happened. Senate Bill 2505 passed with the 60 required “yes” votes to 57 opposition votes.
“They're on the sidelines. They don't want to get on the field of play,” Madigan said about Republicans after the vote.
The personal income tax would increase from 3 percent to 5 percent, and the corporate tax would go from 4.8 percent to 7 percent. Under the legislation, both rates would drop after four years, to 3.75 percent for personal income tax and to 5.25 percent for the corporate income tax. The plan is expected to bring in roughly $6.5 billion in its first year.
Currie estimated that a family of four with an income of $40,000 would pay roughly $800 more a year under the initial increase.
The measure also includes spending caps for the next four fiscal years. The limits would be $36.8 billion in Fiscal Year 2012, $37.5 billion in FY 2013, $38.3 billion in FY 2014 and $39.1 billion in FY 2015. If the legislators spend more, the tax increases would be nullified. It would be up to the Illinois auditor general to determine if the state has overspent. House Democrats described that provision as the “hammer” that will keep future budgeting in line. Both legislative chambers changed their rules to require a three-fifths vote on any legislation that increases the spending limits.
Democrats described those spending increases as lower than the rate of inflation. However, Republicans took issue with the Democrats' initial numbers, on which the structure is based.
Sen. Dale Righter, a Mattoon Republican, called the caps an “ill-fitting theater costume” used to dress up a tax increase to make it seem fiscally responsible.
House Minority Leader Tom Cross said he could not support locking in any increase to the future budget. He said Democrats should work with Republicans to find an appropriate spending level and stick to it while the state tries to make its way out of its budget hole. “Whatever that is, you need to stabilize that number — and that’s the point — instead of growing the number.”
Senate President John Cullerton said that without the tax increase, the future of Illinois and those waiting on state payments, such as human service providers, would be dire. “If we don’t do this … the people who would be waiting to be paid would wait for years to be paid, if they even continue to do business with us.”
Republican Sen. Matt Murphy of Palatine said legislators who voted for the tax increase could no longer claim that job creation is their top priority. “Your number one priority is supporting state spending at or above the current level. … because there is no question there will be job loss with this tax increase.”
However, Sen. Dan Kotowski, a Park Ridge Democrat, said failing to approve new revenue to properly fund the state budget would result in the loss of hundreds of thousands of jobs.
The Senate approved nearly $4 billion in borrowing — to be paid off over eight years — to cover the required payment to public employee pension systems for this fiscal year.
Righter questioned why Illinois needed to borrow after raising the income tax. Cullerton said borrowing was necessary so the state could afford to make the pension payment for this fiscal year. “The money that we raised with the income tax is going to start paying the pension payment for the next fiscal year.”
He added that the General Assembly also extended the emergency budget powers given to Gov. Pat Quinn as part of last spring’s budget bill. Those powers — originally granted for six months but now extended through June 30, the end of the current fiscal year — allowed Quinn to make cuts and allocate lump-sum appropriations the General Assembly sent him in lieu of a line-item budget.
“This bill effectively, for budget purposes, crowns the governor king,” Murphy said.
Currie removed from the bill a “property tax relief” provision that would have provided equal annual rebate checks to property tax payers across Illinois. Republicans complained that it was unfair to give someone who pays a higher level of property taxes the same amount of relief as someone who pays less. Cullerton estimated that the checks for next year would have been about $325.
Two other components to the overall proposed plan failed to clear the House.
Lawmakers in that chamber shot down a $1-a-pack cigarette tax that would have brought in an estimated $370 million for education. That caused a temporary hitch for the income tax increase in the Senate, where some Democrats were disappointed with the lack of new education funds.
Maywood Democratic Sen. Kimberly Lightford said those with concerns, including members of the Senate Black Caucus, we’re promised that the $250 million in revenues that will no longer be needed for property tax relief will go toward education.
She said after the potential revenue sources of the cigarette tax increase and a proposed gaming expansion failed to get support, “we felt like the commitment for education funding was not there.” Lightford said members of her caucus called on Democratic leadership and Gov. Pat Quinn to find money for schools. “You didn’t pass a cigarette tax; didn’t call gaming. You need to put that 250 to education,” she said.
Lightford said $250 million a year for the first four years of the tax increase would go into a fund that would specifically target underperforming schools. Quinn later said of the deal: “Many [of the Black Caucus members] are my friends, and we worked together in campaigns. We believe in working together on important things that help children.”
A plan to borrow $8.75 billion to pay down the state’s backlog of unpaid bills for this fiscal year also failed to get the 71 votes it needed to pass. The loan would have been repaid over 14 years. Spring Valley Democratic Rep. Frank Mautino, sponsor of SB 336, said if the measure had passed, the state could have started to send out checks to schools, providers and vendors in March.
Cross said he is still willing to negotiate with Democrats on a borrowing plan to pay off the bills but said it would have to be smaller and come in tandem with cuts and reforms, such as changes to workers’ compensation. The workers compensation efforts in the lame-duck legislative session fell short, but Cullerton called the issue a “top priority” for the new session, which begins later today.
Gaming expansion and medical marijuana measures that came up for votes in the waning days of the two-year session both died upon adjournment, along with the borrowing plan, workers’ compensation reform and the cigarette tax increase.
Wednesday, September 02, 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.”
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.”
Thursday, July 09, 2009
Looks good for capital, not so much for budget
By Bethany Jaeger
It’s taken a decade, but Gov. Pat Quinn said that come Monday, the state would have a major infrastructure program in place to help spur the economy and send people back to work.
Downstate legislators who met with the governor Thursday afternoon in the Executive Mansion expressed bittersweet sentiments: The governor would sign the long-awaited public works program to send laborers and others back to work, but thousands of other public employees and the people they serve are on the brink of losing their jobs and their access to critical aid. That's because the governor and the legislature still haven’t enacted a balanced operating budget, despite a new fiscal year that started July 1.
Rep. Brandon Phelps, a Harrisburg Democrat, for instance, is in a downstate area in need of economic development. However, he also has a prison in his district that could lose employees under Quinn's plan to cut spending by an additional $1 billion. Enacting the capital bill wouldn’t prevent layoffs of 1,000 Department of Correction employees, he said, adding that such significant layoffs might not save as much money as needed to cover the increased overtime costs.
The General Assembly is scheduled to return to the capital city Tuesday, about the same time the comptroller’s office needs to process checks so the first round of state employees would get paid on time. The governor, facing doubt about whether he can persuade more legislators to support an income tax increase to fill what he says is a $9.2 billion budget deficit, said he would consider Plan B, even if that includes a temporary spending plan.
“I’m open to anything that gets us moving in a positive direction, whatever it takes,” Quinn said. That could include a five-month budget so he could continue to lobby for an income tax increase.
But, asked Rep. Bill Black, a Danville Republican, at what level would the five-month budget be based? Would it be based on the $26 billion plan already approved by the legislature but partially vetoed by the governor? Or would it be the $28 billion originally proposed by Quinn?
In May, the legislature approved along partisan lines a budget that reduced funding for human services by half of what the governor proposed. Quinn then vetoed much of that spending plan and said that regardless of whether an income tax increase passes, he would still have to make about $1 billion in cuts. He recently announced a general plan that lacked specifics, although legislators said today they hope by Tuesday to receive more details.
Rep. Roger Eddy, a Hutsonville Republican, said a five-month budget is risky because it would assume that the legislature would approve an income tax increase before the end of the year. “Then you’ve spent for five months based on revenue you may or may not get. I think it’s very risky.”
He added, however, that it might be the most politically palatable option for many legislators because by this fall, incumbents would know whether they faced a serious challenger in the next election.
Either way, Eddy said, Quinn faces a “triple negative” in trying to persuade lawmakers to vote for a tax hike because the new revenue would not prevent further budget cuts. “It would be nice to vote for a tax increase — if you have to — and go home and talk about all the new wonderful programs you’re going to start. This combination is: Vote for revenue, borrow $2.2 billion, make $1 billion in cuts above the cuts that have already been made. That’s a pretty tough sell.”
Rep. Mike Bost, a Murphysboro Republican, said he appreciates that Quinn is showing some direction in where he might cut, but he’s concerned that the governor is making broad statements to stir up local residents so they pressure their legislators to approve an income tax increase. The GOP has remained mostly united on opposing a tax hike without action on other cuts and what they see as reforms because they fear giving billions of new dollars to a group of leaders which he said “can’t control themselves.”
Legislators said they could be in session Tuesday through Thursday, although several expressed doubt about how they would solve the budget impasse by then. “I think it’s going to be a challenge for all the pieces to come together,” said Rep. Bob Flider, a Mount Zion Democrat.
CAPITAL
After the legislature in May overwhelmingly approved the first major infrastructure program in a decade, Quinn said he wouldn’t sign the package into law until he received a balanced operating budget on his desk. With little consensus on how to balance a severely out-of-whack budget, the capital program remained in limbo and jeopardized federal matching funds.
The governor said today he would sign the capital program into law on Monday. He previously said on May 31 that the lack of an operating budget would hurt the state’s bond rating, making it more expensive to borrow money.
Thursday afternoon, he said the state still needed both. “I think we need to have a good budget that is a balanced budget that’s fair and decent. Together with a good jobs program, we can get Illinois focused on economic recovery and budget stabilization.”
Shovels might not move dirt for weeks, maybe months. We’ll have more on that and other reaction soon.
It’s taken a decade, but Gov. Pat Quinn said that come Monday, the state would have a major infrastructure program in place to help spur the economy and send people back to work.
Downstate legislators who met with the governor Thursday afternoon in the Executive Mansion expressed bittersweet sentiments: The governor would sign the long-awaited public works program to send laborers and others back to work, but thousands of other public employees and the people they serve are on the brink of losing their jobs and their access to critical aid. That's because the governor and the legislature still haven’t enacted a balanced operating budget, despite a new fiscal year that started July 1.
Rep. Brandon Phelps, a Harrisburg Democrat, for instance, is in a downstate area in need of economic development. However, he also has a prison in his district that could lose employees under Quinn's plan to cut spending by an additional $1 billion. Enacting the capital bill wouldn’t prevent layoffs of 1,000 Department of Correction employees, he said, adding that such significant layoffs might not save as much money as needed to cover the increased overtime costs.
The General Assembly is scheduled to return to the capital city Tuesday, about the same time the comptroller’s office needs to process checks so the first round of state employees would get paid on time. The governor, facing doubt about whether he can persuade more legislators to support an income tax increase to fill what he says is a $9.2 billion budget deficit, said he would consider Plan B, even if that includes a temporary spending plan.
“I’m open to anything that gets us moving in a positive direction, whatever it takes,” Quinn said. That could include a five-month budget so he could continue to lobby for an income tax increase.
But, asked Rep. Bill Black, a Danville Republican, at what level would the five-month budget be based? Would it be based on the $26 billion plan already approved by the legislature but partially vetoed by the governor? Or would it be the $28 billion originally proposed by Quinn?
In May, the legislature approved along partisan lines a budget that reduced funding for human services by half of what the governor proposed. Quinn then vetoed much of that spending plan and said that regardless of whether an income tax increase passes, he would still have to make about $1 billion in cuts. He recently announced a general plan that lacked specifics, although legislators said today they hope by Tuesday to receive more details.
Rep. Roger Eddy, a Hutsonville Republican, said a five-month budget is risky because it would assume that the legislature would approve an income tax increase before the end of the year. “Then you’ve spent for five months based on revenue you may or may not get. I think it’s very risky.”
He added, however, that it might be the most politically palatable option for many legislators because by this fall, incumbents would know whether they faced a serious challenger in the next election.
Either way, Eddy said, Quinn faces a “triple negative” in trying to persuade lawmakers to vote for a tax hike because the new revenue would not prevent further budget cuts. “It would be nice to vote for a tax increase — if you have to — and go home and talk about all the new wonderful programs you’re going to start. This combination is: Vote for revenue, borrow $2.2 billion, make $1 billion in cuts above the cuts that have already been made. That’s a pretty tough sell.”
Rep. Mike Bost, a Murphysboro Republican, said he appreciates that Quinn is showing some direction in where he might cut, but he’s concerned that the governor is making broad statements to stir up local residents so they pressure their legislators to approve an income tax increase. The GOP has remained mostly united on opposing a tax hike without action on other cuts and what they see as reforms because they fear giving billions of new dollars to a group of leaders which he said “can’t control themselves.”
Legislators said they could be in session Tuesday through Thursday, although several expressed doubt about how they would solve the budget impasse by then. “I think it’s going to be a challenge for all the pieces to come together,” said Rep. Bob Flider, a Mount Zion Democrat.
CAPITAL
After the legislature in May overwhelmingly approved the first major infrastructure program in a decade, Quinn said he wouldn’t sign the package into law until he received a balanced operating budget on his desk. With little consensus on how to balance a severely out-of-whack budget, the capital program remained in limbo and jeopardized federal matching funds.
The governor said today he would sign the capital program into law on Monday. He previously said on May 31 that the lack of an operating budget would hurt the state’s bond rating, making it more expensive to borrow money.
Thursday afternoon, he said the state still needed both. “I think we need to have a good budget that is a balanced budget that’s fair and decent. Together with a good jobs program, we can get Illinois focused on economic recovery and budget stabilization.”
Shovels might not move dirt for weeks, maybe months. We’ll have more on that and other reaction soon.
Monday, July 06, 2009
Gov. Quinn: Cuts are coming
By Bethany Jaeger
Gov. Pat Quinn is slated to announce layoffs and other government spending cuts in what he said is an effort to cut another $1 billion from the state’s operating budget. He’s scheduled to announce specific cuts in Chicago tomorrow afternoon, one week before the legislature is scheduled to return to Springfield to consider his recent veto of the part of the budget that would fund human services at reduced levels.
After meeting with suburban legislators today, Quinn said public employee unions would be notified this week of unpaid days off and layoffs. He did not specify where the layoffs would take place; however, Republican Rep. Jim Durkin of Western Springs attended the meeting and said the administration outlined 1,000 layoffs from the Illinois Department of Corrections and about 900 layoffs from the Department of Human Services, as well as cuts in grant programs.
One of the largest unions, the American Federation of State, County and Municipal Employees Council 31, had not received official notice, said Anders Lindall, union spokesman, adding that layoffs are expected without a new flow of revenue into state coffers. “As long as the budget is broken and legislators haven’t passed sufficient revenue, layoffs would be inevitable. Not just layoffs, but damaging cuts to essential human services and public safety.”
Lindall said furlough days or layoffs at state agencies would be tantamount to cutting services, wouldn’t save as much money as needed and could actually cost the state more money in added overtime pay. “Certainly, the thousands of layoffs he’s now talking about would have a profound harmful impact on basic services in DHS, safety in the prisons, DCFS functions and all of the basic services that Illinoisans [rely upon].”
According to Durkin, the governor indicated in the private meeting that he was willing to operate on a temporary state budget until a more permanent solution could be reached. That would counter Quinn’s previous statements that he would not accept a temporary budget.
The governor continues to frame a state income tax increase as the only solution to balancing the budget, which he estimates is $9.2 billion out of balance, but several legislators said they don’t expect a tax hike to win approval next week.
“I don’t think anybody’s mind was changed with today’s meeting,” Durkin said. “And I think that at this point in the year, I just don’t know how you get to 71.” He referred to the 71 votes needed in the House to approve any legislation now that the legislature has gone into overtime session. And cutting thousands of employees from prisons, for instance, won’t win political points with legislators, Durkin added. “I can see where a lot of these jobs are. These are in districts where you might have people who previously were supportive of an income tax increase. You lost ’em.”
Rep. Jack Franks, a Woodstock Democrat who attended today’s meeting, said the governor hasn’t proven to the public that a tax increase is a last resort. Instead of identifying specific spending cuts and negotiating with unions early in the spring, the governor has waited until the new fiscal year this summer to lay the groundwork for a tax hike. “This should have been the very last option on the table. And for him, it was the first and only,” he said.
Franks said his recommendations to the governor have been to cut member initiatives, otherwise known as pork projects, reduce or eliminate the pay of various board members and commissioners, close some state prisons and move to a two-year budget cycle.
Few legislators had high expectations for next week’s special session. “I think next will be a colossal waste of time,” said Rep. Dennis Reboletti, an Elmhurst Republican. “I don’t think any suburban legislators’ mind was changed by this meeting.”
In addition to considering the governor’s veto of the human services budget, the Senate also could reconsider a short-term borrowing scheme that the governor initially proposed but then lobbied against at the last minute — a bone of contention with many lawmakers.
Quinn, however, remains an eternal optimist. He has met with female and suburban legislators and said he plans to meet with groups of legislators from all regions of the state because he believes answering questions, offering suggestions and listening to criticisms has resulted in progress. “I would like to see all of this done by the 16th of this month,” he said.
Gov. Pat Quinn is slated to announce layoffs and other government spending cuts in what he said is an effort to cut another $1 billion from the state’s operating budget. He’s scheduled to announce specific cuts in Chicago tomorrow afternoon, one week before the legislature is scheduled to return to Springfield to consider his recent veto of the part of the budget that would fund human services at reduced levels.
After meeting with suburban legislators today, Quinn said public employee unions would be notified this week of unpaid days off and layoffs. He did not specify where the layoffs would take place; however, Republican Rep. Jim Durkin of Western Springs attended the meeting and said the administration outlined 1,000 layoffs from the Illinois Department of Corrections and about 900 layoffs from the Department of Human Services, as well as cuts in grant programs.
One of the largest unions, the American Federation of State, County and Municipal Employees Council 31, had not received official notice, said Anders Lindall, union spokesman, adding that layoffs are expected without a new flow of revenue into state coffers. “As long as the budget is broken and legislators haven’t passed sufficient revenue, layoffs would be inevitable. Not just layoffs, but damaging cuts to essential human services and public safety.”
Lindall said furlough days or layoffs at state agencies would be tantamount to cutting services, wouldn’t save as much money as needed and could actually cost the state more money in added overtime pay. “Certainly, the thousands of layoffs he’s now talking about would have a profound harmful impact on basic services in DHS, safety in the prisons, DCFS functions and all of the basic services that Illinoisans [rely upon].”
According to Durkin, the governor indicated in the private meeting that he was willing to operate on a temporary state budget until a more permanent solution could be reached. That would counter Quinn’s previous statements that he would not accept a temporary budget.
The governor continues to frame a state income tax increase as the only solution to balancing the budget, which he estimates is $9.2 billion out of balance, but several legislators said they don’t expect a tax hike to win approval next week.
“I don’t think anybody’s mind was changed with today’s meeting,” Durkin said. “And I think that at this point in the year, I just don’t know how you get to 71.” He referred to the 71 votes needed in the House to approve any legislation now that the legislature has gone into overtime session. And cutting thousands of employees from prisons, for instance, won’t win political points with legislators, Durkin added. “I can see where a lot of these jobs are. These are in districts where you might have people who previously were supportive of an income tax increase. You lost ’em.”
Rep. Jack Franks, a Woodstock Democrat who attended today’s meeting, said the governor hasn’t proven to the public that a tax increase is a last resort. Instead of identifying specific spending cuts and negotiating with unions early in the spring, the governor has waited until the new fiscal year this summer to lay the groundwork for a tax hike. “This should have been the very last option on the table. And for him, it was the first and only,” he said.
Franks said his recommendations to the governor have been to cut member initiatives, otherwise known as pork projects, reduce or eliminate the pay of various board members and commissioners, close some state prisons and move to a two-year budget cycle.
Few legislators had high expectations for next week’s special session. “I think next will be a colossal waste of time,” said Rep. Dennis Reboletti, an Elmhurst Republican. “I don’t think any suburban legislators’ mind was changed by this meeting.”
In addition to considering the governor’s veto of the human services budget, the Senate also could reconsider a short-term borrowing scheme that the governor initially proposed but then lobbied against at the last minute — a bone of contention with many lawmakers.
Quinn, however, remains an eternal optimist. He has met with female and suburban legislators and said he plans to meet with groups of legislators from all regions of the state because he believes answering questions, offering suggestions and listening to criticisms has resulted in progress. “I would like to see all of this done by the 16th of this month,” he said.
Wednesday, June 24, 2009
Everything in limbo
By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributing
Illinois’ human service providers, as well as other state contractors, remain in limbo as to whether they’ll receive state funding after July 1. The General Assembly finished its special legislative session this afternoon without sending a spending plan to the governor. Lawmakers aren’t scheduled to return until Monday afternoon (the Senate won’t be back until Tuesday), which some providers said would be too late. Providers, many of whom rallied at the Capitol yesterday, anticipate having to close their doors or lay off employees without a state operating budget in place by then.
“What’s going on right now is cruel, it’s cynical and it doesn’t need to be happening. And it should have been addressed this week,” Senate Minority Leader Christine Radogno said after the legislature adjourned. She added: “There is a lack of clarity, a lack of leadership, in terms of what is going on. And in the meantime, people are dangling in the wind thinking that their lives are going to be inextricably altered.”
She proposed enacting a temporary budget to keep state services going, uninterrupted, and to give service providers more predictability.
Gov. Pat Quinn continues to publicly reject the idea of a temporary budget and said lawmakers still have time to enact a full-year balanced budget within six days. But he said balancing the budget, which he projects will carry a $9.2 billion deficit, will require a two-year income tax increase to generate $4.2 billion. (Comptroller Dan Hynes calculated the deficit at $7 billion.)
Legislative leaders of both political parties have cast doubt on the governor’s ability to gain enough votes in each chamber to approve a tax increase by July 1, although House Minority Leader Tom Cross said a few of his members are leaning toward a tax increase if they see action on other efficiencies and long-term spending reforms first.
Senate Democrats maintain that they approved a version of a permanent income tax increase in House Bill 174, which never got called for a vote in the House. According to Sen. James Meeks, the caucus doesn’t want to give up on the idea of offering property tax relief and increased education funding. Meeks said a temporary increase would result in a permanent increase in two years. “Temporary should scream out to everybody saying, ‘In two years, they’ll be back.’”
There could be more immediate support for a short-term borrowing scheme. A plan backed by Quinn would issue pension obligation notes rather than bonds, which typically are repaid over longer periods of time with higher interest costs. The House advanced the plan, Senate Bill 415, today. It would allow the state to make its full contribution into the public employee pension systems and free up $2.2 billion to help plug the deficit.
“If we get $2 billion to help close the deficit, that’s a good thing,” Quinn said after finishing a series of meetings with all four legislative caucuses. “We’re making progress, but we still have $7 billion to go.”
The governor and all four caucuses appear to agree one goal: to reduce spending by another $1 billion. But they might disagree on how to do that.
Quinn said his administration could save about $125 million by mandating 12 unpaid days off, or furlough days, for state employees, including unionized workers. Layoffs also could be considered, he said, although he added that he wouldn’t pursue layoffs until after he and the General Assembly settled on whether the state would generate new revenues first. “Under our contract, we can lay off employees if we don’t have the money to pay them,” he said.
Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said union leaders already met with the administration last week and determined that furlough days and layoffs wouldn’t save significant amounts of money. Henry Bayer, Council 31 executive director, said last week that even if every state employee worked the entire year unpaid, the state would only save about $3 billion. Lindall added this afternoon, “Any number of furlough days would be an insignificant savings to the state but a very real reduction in services.”
Cross said his caucus agrees with the need to look for $1 billion in cuts and recommends moratoriums on programs, furlough days and salary freezes, as well as reduced travel budgets.
Capital and recall
Two other items on hold include the $29 billion capital construction program and a provision that would allow voters to decide whether they wanted to change the state Constitution so they could recall the sitting governor.
Quinn said he will not sign the construction program without an operating budget in place. Democratic Sens. Martin Sandoval of Chicago and John Sullivan of Rushville said the capital plan and the operating budget have nothing to do with one another. In a Statehouse news conference, they joined organized labor groups to say Quinn has fallen through on his promise to immediately put people to work. "People are falling off the edge, losing their homes, having a very difficult time making ends meet, and he’s decided to hold the jobs bill as a political football until he gets his tax hike,” Sandoval said, citing the state’s 10.1 percent unemployment rate.
On the other hand, the Senate Democrats have held one of Quinn’s initiatives, House Joint Resolution Constitutional Amendment 31: a recall provision. Senate President John Cullerton said yesterday he would not call the provision for a vote until Quinn signed an ethics package that would limit the amount individuals, businesses and political organizations could donate to candidates. However, the Senate hasn’t even sent the measure, HB 7, to the governor’s desk.
Illinois’ human service providers, as well as other state contractors, remain in limbo as to whether they’ll receive state funding after July 1. The General Assembly finished its special legislative session this afternoon without sending a spending plan to the governor. Lawmakers aren’t scheduled to return until Monday afternoon (the Senate won’t be back until Tuesday), which some providers said would be too late. Providers, many of whom rallied at the Capitol yesterday, anticipate having to close their doors or lay off employees without a state operating budget in place by then.
“What’s going on right now is cruel, it’s cynical and it doesn’t need to be happening. And it should have been addressed this week,” Senate Minority Leader Christine Radogno said after the legislature adjourned. She added: “There is a lack of clarity, a lack of leadership, in terms of what is going on. And in the meantime, people are dangling in the wind thinking that their lives are going to be inextricably altered.”
She proposed enacting a temporary budget to keep state services going, uninterrupted, and to give service providers more predictability.
Gov. Pat Quinn continues to publicly reject the idea of a temporary budget and said lawmakers still have time to enact a full-year balanced budget within six days. But he said balancing the budget, which he projects will carry a $9.2 billion deficit, will require a two-year income tax increase to generate $4.2 billion. (Comptroller Dan Hynes calculated the deficit at $7 billion.)
Legislative leaders of both political parties have cast doubt on the governor’s ability to gain enough votes in each chamber to approve a tax increase by July 1, although House Minority Leader Tom Cross said a few of his members are leaning toward a tax increase if they see action on other efficiencies and long-term spending reforms first.
Senate Democrats maintain that they approved a version of a permanent income tax increase in House Bill 174, which never got called for a vote in the House. According to Sen. James Meeks, the caucus doesn’t want to give up on the idea of offering property tax relief and increased education funding. Meeks said a temporary increase would result in a permanent increase in two years. “Temporary should scream out to everybody saying, ‘In two years, they’ll be back.’”
There could be more immediate support for a short-term borrowing scheme. A plan backed by Quinn would issue pension obligation notes rather than bonds, which typically are repaid over longer periods of time with higher interest costs. The House advanced the plan, Senate Bill 415, today. It would allow the state to make its full contribution into the public employee pension systems and free up $2.2 billion to help plug the deficit.
“If we get $2 billion to help close the deficit, that’s a good thing,” Quinn said after finishing a series of meetings with all four legislative caucuses. “We’re making progress, but we still have $7 billion to go.”
The governor and all four caucuses appear to agree one goal: to reduce spending by another $1 billion. But they might disagree on how to do that.
Quinn said his administration could save about $125 million by mandating 12 unpaid days off, or furlough days, for state employees, including unionized workers. Layoffs also could be considered, he said, although he added that he wouldn’t pursue layoffs until after he and the General Assembly settled on whether the state would generate new revenues first. “Under our contract, we can lay off employees if we don’t have the money to pay them,” he said.
Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said union leaders already met with the administration last week and determined that furlough days and layoffs wouldn’t save significant amounts of money. Henry Bayer, Council 31 executive director, said last week that even if every state employee worked the entire year unpaid, the state would only save about $3 billion. Lindall added this afternoon, “Any number of furlough days would be an insignificant savings to the state but a very real reduction in services.”
Cross said his caucus agrees with the need to look for $1 billion in cuts and recommends moratoriums on programs, furlough days and salary freezes, as well as reduced travel budgets.
Capital and recall
Two other items on hold include the $29 billion capital construction program and a provision that would allow voters to decide whether they wanted to change the state Constitution so they could recall the sitting governor.
Quinn said he will not sign the construction program without an operating budget in place. Democratic Sens. Martin Sandoval of Chicago and John Sullivan of Rushville said the capital plan and the operating budget have nothing to do with one another. In a Statehouse news conference, they joined organized labor groups to say Quinn has fallen through on his promise to immediately put people to work. "People are falling off the edge, losing their homes, having a very difficult time making ends meet, and he’s decided to hold the jobs bill as a political football until he gets his tax hike,” Sandoval said, citing the state’s 10.1 percent unemployment rate.
On the other hand, the Senate Democrats have held one of Quinn’s initiatives, House Joint Resolution Constitutional Amendment 31: a recall provision. Senate President John Cullerton said yesterday he would not call the provision for a vote until Quinn signed an ethics package that would limit the amount individuals, businesses and political organizations could donate to candidates. However, the Senate hasn’t even sent the measure, HB 7, to the governor’s desk.
Tuesday, June 23, 2009
Pension plan delays tax hike vote, for now
By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributingThe latest scheme for the General Assembly to get closer to a balanced budget is to borrow money to fully pay the state’s contribution into the public employee pension system and to free up about $2 billion to help stave off deep cuts to human services.
This on a day when more than 5,000 advocates, parents and children rallied at the Capitol with Gov. Pat Quinn to urge an income tax increase to help fight those cuts. Top Democratic legislators indicated today, however, that they would not vote for an income tax increase this week. And if they did, there wouldn’t be enough support among Democrats to approve it without Republican votes. The GOP remains united against a tax increase, at least, officially. Some Republican members in both chambers have privately said they could support a tax increase but have stuck with their caucuses.
Senate Minority Leader Christine Radogno said that Republicans are not ready to vote for an income tax increase and described the projected cuts to human services as a “cynical ploy,” adding that spending reductions could be spread fairly across all areas of state government.
The idea to issue pension obligation notes, which we wrote about earlier this week, poses a less politically risky option. The short-term borrowing plan would be repaid within five years and would fund the state’s $4 billion contribution into the public employee pension system for the fiscal year that starts July 1.
It’s generally agreed that the plan would free up about $2.2 billion, which the General Assembly would put into the general revenue fund and give the governor, essentially, a blank check. The ball would be in Quinn’s court, then, to cut or to plug where he saw fit.
“This is more discretion than we’ve ever given any other governor, simply because the times require it,” said Rep. Frank Mautino, assistant majority leader from Spring Valley.
He said the pension obligation notes would combine with previously approved authority to sweep extra money (Senate Bill 1433) out of dedicated funds and to refinance other state debt (SB 1609). All three revenue sources combined would allow the spending authority to come within $2 billion of the governor’s proposed budget. Quinn wanted authority to spend $28 billion. The latest plan would authorize about $26 billion, meaning he would still have to cut back spending.
The legislature could vote on the pension plan Wednesday, according to Mautino.
A vote on Quinn’s proposed two-year tax hike, however, would not happen until the governor provided a list of specific cuts he would make if he didn’t have new tax revenues to spend, according to several House Democrats. His temporary tax increase would generate about $4.5 billion. But there’s still debate about the size of the budget deficit, said Rep. Art Turner, deputy majority leader from Chicago.
“The biggest issue right now is just trying to put the bean counters together to come up with what’s the agreed number,” he said. “So then from there, we can … say, ‘What’s going to be the number that we have to use in terms of the cuts?’”
A Republican, Rep. Richard Myers of Colchester, said he’d be willing to look at a tax increase if he knew where the money was specifically going to be spent.
Comptroller Dan Hynes added to the debate with a letter to the governor. He wrote: “I believe that part of your difficulty in obtaining votes for an income tax increase is the fact that the public is confused about how much money is really needed to fix the deficit. Legislators are, therefore, understandably reluctant to vote for an ever-changing proposal for an ill-defined problem. In a sense, we have all been given a false choice: raise taxes by $4 [billion] to $5 billion or cut human services by the same amount.”
He proposed starting over, operating on a 60-day budget to keep services going while the legislature found more ways to cut spending. He cited across-the-board cuts to contracts, grants and agency spending. And then he suggested such new revenue sources as an expansion of the sales tax, building new casinos and increasing cigarette taxes. All of those proposals came up during the spring legislative session but failed to advance in both chambers.
Senate Democrats point to their version of an income tax increase, which also would offer property tax relief and an expansion of the sales tax. Senate President John Cullerton said his caucus already took the hard vote on House Bill 174 last month and that it’s up to the other caucuses to make the next move. “Anything is negotiable, as long as we keep the principles in mind that we need to balance our budget and not have these draconian cuts that all the people surrounding the capital are complaining about today.”
Cullerton added that his caucus would not vote on the governor’s desired “recall” provision until Quinn enacted campaign finance reforms approved by the legislature last month. The House already approved the recall provision, which would allow voters to decide whether to change the state Constitution so they could recall the governor at the time. The provision awaits final action in the Senate.
The rally
By Hilary Russell and Jamey Dunn, with Bethany Jaeger contributing
The secretary of state’s office confirmed that more than 5,000 people attended the rally coordinated by numerous social service providers and public employee unions. Police temporarily blocked more people from entering the Capitol out of safety concerns, said Henry Haupt, spokesman for the secretary of state.
The temperature rose as participants chanted, “People before politics,” “Do the people’s work,” and “No budget cuts.” Signs advocated for everything from substance abuse treatment services to early childhood education and autism. The anecdotes were endless.
For instance, Michelle Lefrere, who has epilepsy and volunteers with Springfield’s Epilepsy Resource Center, said without an income tax increase, the doors to the center would close June 30. Having used the center since the age of 9 and turning 40 next year, she said: “There will be no counseling, no recommendations to doctors, no job placement. There won’t be any help for people with epilepsy in Springfield or the certain communities. There won’t be any money for research.”
After the rally, Quinn remained optimistic that the legislature would vote on a tax increase by June 30, the end of the fiscal year. In any case, he said, “I am not going to preside over a dismantling of the fundamental human safety net that we are proud of in Illinois.”
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