Will Illinois lawmakers extend the 'temporary' income tax?

News-DemocratFebruary 1, 2014 

Look for taxing and spending to be at the forefront for state lawmakers during their spring session.

Remember the temporary, 67 percent increase in the state income tax approved in 2011? It's set to expire next year, and if it does, the state kisses goodbye the roughly $7 billion to $8 billion it provides yearly.

In a report released earlier this month, Gov. Pat Quinn's office of management and budget outlined a three-year projection showing the state's deficit would grow to $1.9 billion in 2015 and $4.1 billion in 2016 if the increase sunsets as scheduled. The state's backlog of bills would also grow, from an expected $5.6 billion at the end of this fiscal year in July to $16.2 billion in 2017.

A corporate tax cut also is being discussed, with the goal of improving the state's business image.

Amid those revenue concerns, many lawmakers would like to see another big construction program, known as a capital bill, for building and improving roads and other projects.

So how does a capital bill get funded?

"Well, that's the challenge," said Sen. James Clayborne, D-Belleville.

Clayborne said a construction program is needed for jobs and the economy.

Sen. Bill Haine, D-Alton, said there "have been some discussions" on how to pay for a capital bill, but nothing concrete yet.

"I'm strongly in favor of a capital bill," Haine said.

Sen. Kyle McCarter, R-Lebanon, said Illinois is in no position to launch a big spending program.

"If you can't pay your light bill, the last thing you look at is adding on a two-car garage," McCarter said. "It may be nice to have, but we still have a backlog of bills we haven't paid."

Sen. Dave Luechtefeld, R-Okawville, said: "I do believe we need a capital bill. Most legislators would say that, but how do you pay for it? That's the problem, that's the real rub. I've heard all kinds of possibilities -- the progressive income tax was one of those."

The last construction spending plan was approved in 2009 -- a $31 billion infusion creating thousands of jobs and helping rebuild the state's crumbling infrastructure. It was paid for through higher taxes and a vast expansion of legalized gambling.

Rep. Jay Hoffman, D-Belleville, said a capital bill "needs to be our No. 1 priority." He said a gaming expansion could possibly help fund it.

Rep. Charlie Meier, R-Okawville, said: "I hate new taxes, but I do realize that roads, bridges, water lines and infrastructure can help bring business in. I could vote for a capital bill if it's done right. I'm not going to say I'm for or against it right now, but if it's done right, I could be for it."

Rep. Jerry Costello, D-Smithton, said: "I would love to see a capital bill, but at the end of the day, how do you pay for it?"

Costello said an extension of the temporary income tax increase "is probably, toward the end of the session, going to be the No. 1 hot-button issue. Personally, I'll be voting 'no.'"

Haine said the legislature might hold off on the question of extending the temporary tax, and let it play out as something voters decide through this year's governor's race.

One idea for replacing the revenue from the temporary tax is a progressive or graduated income tax, where the rate would increase with higher incomes.

Meier predicts the progressive income tax will be pushed as an emergency measure needed to prevent massive cuts in state services.

"They've loaded that train up already. She's on the tracks and fired up," Meier said.

Meier said one plan he's heard of would result in an increased income tax for someone making as little as $18,000 a year. McCarter said someone making as little as $10,000 could end up paying more in taxes.

The legislature would have to vote to put a progressive tax on the ballot, and then voters would need to approve it. McCarter said it would be a tough sell to voters.

"I don't know why you would give more money to these folks who have this insatiable desire to spend more money," McCarter said. "I understand class envy is a cool thing today, it even gets promoted by the president himself, but it's not right. And if you want to keep the job creators in Illinois, you really need to quit abusing them."

House Speaker Michael Madigan, D-Chicago, has proposed cutting the state's corporate income tax in half to 3.5 percent. In the short term it would cost the state about $1.5 billion in revenue per year, but supporters say it would lead to economic growth and therefore an overall increase in tax revenue.

Kay, who has previously proposed such a cut, said the current corporate tax rate has stifled growth. "I'm sure the speaker saw that and decided he better try to energize the business base and improve the image of the state," Kay said.

Costello, who also has pushed for such a cut, said Madigan might try to combine the cut with some other type of revenue or tax increase.

"I'm sure it gets tied into something. It's just a matter of what," Costello said. "I'm interested to see where this goes, because as a state we need to get a more pro-business outlook and reputation."


Gov. Pat Quinn, during his State of the State address on Wednesday, again called for increasing Illinois' minimum wage from $8.25 to $10 per hour.

Hoffman said he predicts legislators will hold public hearings on the issue.

"Exactly what's going to happen, that's difficult to predict. But I do believe it'll be an issue at the forefront this spring," Hoffman said.

Luechtfeld said Illinois already has a high enough minimum wage.

"We've got the highest minimum wage in the Midwest, and we've also got the highest unemployment in the Midwest," Luechtfeld said. "I think it's more of a political thing. I think the Democrats have decided it's a good political issue -- to make it appear that they care more, and they do a good job of selling that."

Costello said: "I don't doubt that some type of an increase may occur. Personally, it's my opinion that we need to look to business owners and work with them. I would probably be a 'no' vote right now."

Costello said a minimum wage increase is particularly worrisome to him because his district borders Missouri. Illinois businesses and employers along the border could suffer, he said.


Haine, who was a lead sponsor of the bill last year to allow medical use of marijuana, doesn't foresee a push for full-on legalization, as Colorado and Washington state have done.

"To me, it's not even in the discussion stage in Illinois," Haine said.

Haine does, however, expect some tweaking of the medical marijuana law as it gets implemented. For example, he said he'll seek passage of a bill that would allow a person to have both a medical marijuana card and a gun permit. Current rules prohibit having both.

"To me, there's no nexus between those two issues at all," Haine said.


Costello, who was a lead sponsor of last year's concealed-carry bill, said the law likely will get some fine-tuning.

For example, he said he'll file a bill that would allow military personnel to use their service paperwork to apply for an Illinois concealed-carry permit if they're from out-of-state but are stationed in Illinois. Currently, an Illinois driver's license or identification card is required for a carry permit.

Costello said there could be attempts by opponents to water-down the concealed-carry law, but proponents should be able to stave them off.


Left over from the fall session is a proposal to expand gambling. It's an intriguing scenario, because it's not just the pro-gambling and anti-gambling factions at odds. This proposal has pitted one pro-gambling bloc -- the casinos -- against another -- the horse-racing tracks.

The proposal, which last year cleared the Senate but wasn't called for a vote in the House, would have allowed a new casino in Chicago as well as new casinos in Rockford, Danville, Lake County and the south Chicago suburbs.

The plan also would allow slot machines at Chicago's airports and up to 900 slot machines at each of the state's horse-racing tracks, such as Fairmount Park in Collinsville. The horse track says it needs slot revenue to be able to offer racing purses comparable to those in other states, where horse tracks are allowed to have slots. But the Casino Queen in East St. Louis is concerned about increased competition for gamblers.

Rep. Eddie Lee Jackson, D-East St. Louis, said at a hearing Tuesday that he wants the legislation to end up being a "win-win situation" for both sides. But he noted that Casino Queen taxes provide 40 percent of East St. Louis' municipal revenue, and "the finances are still fragile with the city."

Hoffman said: "I do believe, as far as horse-racing goes, we're the only state in the nation that doesn't have slots at the tracks, to go toward purses to help attract horses, or have some sort of revenue-sharing from casinos that came in after the horse tracks."

Clayborne said he hopes the casino supporters and the horse-track supporters can "come together and come up with some form of compromise" that would allow both entities to remain profitable and provide jobs.

Luechtefeld said slots at race tracks will no doubt hurt casinos.

"But I'm not necessarily a big fan of the casinos," Luechtefeld said. "The casino industry is what killed the race tracks. And the race tracks are a big industry in the agriculture community."


Kay and McCarter said they'll be working this spring on bills to further reform Illinois workers' compensation laws. They said reform measures approved by the legislature a few years ago haven't been effective.

"We need to do some things that are really going to fix the problem," Kay said.

Kay said he was informed Friday by House leadership that House members will be allowed to file only five bills apiece this spring. Kay said each of his five will deal with workers' compensation.


Meier said he wants to pass legislation to "help the cupcake girl" -- 11-year-old cupcake-maker Chloe Stirling of Troy, whose unlicensed business recently got shut down by the Madison County Health Department.

Meier said having health departments "going so far" is a threat to time-honored practices such as bake sales, or women who have side interests of making cakes for weddings.


In an election year, with a governor's race, everything the legislature does will likely have political undertones.

Haine said, "There'll be a lot of political posturing, more so than usual. That goes on in every state capitol, and we'll have more of it this year, but we'll work hard and get things done to improve the society that we live in Illinois."

Luechtefeld said: "It could be an interesting next three to four months because there are some big issues, such as what the Illinois Supreme Court will do with the pension reform that we passed. You've got the temporary income tax going away, and it'll be interesting to see how the governor candidates handle that -- what they say they want to do."

Hoffman said an extension of the temporary income tax increase might not even get discussed in the legislature.

"I just don't see it. Let's be honest: It's a gubernatorial election year," Hoffman said.

Contact reporter Brian Brueggemann at bbrueggemann@bnd.com or 239-2511.

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