Quinn wants a permanent tax hike

News-DemocratMarch 26, 2014 

Southwestern Illinois state senators react to Illinois Gov. Pat Quinn's budget address and call to make the state income tax hike permanent.

BRIAN BRUEGGEMANN/BND

— The temporary income tax hike that costs Illinois workers one week of pay per year would become permanent under Gov. Pat Quinn's budget plans in order to prevent large cuts in spending.

Quinn proposed making the tax permanent during his annual budget speech Wednesday.

Illinois' roughly 67 percent income tax increase was approved in 2011 and starts to roll back in January, leaving a roughly $1.6 billion revenue drop. State agencies have been bracing for dire cuts and top lawmakers have been warning of tough choices for weeks.

Quinn tied his plan to relief for homeowners, proposing that those who pay property taxes get a $500 refund.

Quinn said his plan represents "bold and honest action" and would move Illinois "beyond the era of annual budget emergencies."

The plan got a cold response from metro-east Republicans in the legislature. Sen. Kyle McCarter, R-Lebanon, said there's "nothing more permanent than a temporary tax increase."

McCarter said the temporary tax has already raised $26 billion.

"And now they say they don't have enough money," McCarter said. "I think we should first ask, where's this money gone that you took from us in the first place? For us to give this state government one more dime would be wrong."

Sen. Dave Luechtefeld, R-Okawville, said the state's debt is "bigger than it ever was," and "it's time for Quinn to "take some of the credit for the failures of this state."

Sen. Bill Haine, D-Alton, voted in favor of the temporary tax and has previously said he would oppose making it permanent. Haine on Wednesday said the governor effectively presented a case for what will happen if the tax expires, and now "the citizens are going to have to respond."

Haine was lukewarm to the idea of making the tax permanent.

"I'd want to hear from my citizens as to the effect on their lives, our communities, across the board. I'm not going to consider it until we have all the facts," Haine said.

He added, "The governor outlined a grim financial reality. We need a responsible answer to avoid firing police, closing jails and releasing inmates, but we shouldn't blindly react and immediately turn to a tax increase as the solution."

Sen. James Clayborne, D-Belleville, who serves as the Senate Majority Leader and also voted for the temporary tax, said: "This is a difficult time, and over the next few months we need to ask ourselves a lot of difficult questions about where we are leading our state."

Illinois still has a backlog of $6 billion in unpaid bills, the nation's lowest credit rating and uncertainty with its pension debt.

Quinn did not mention other legislative proposals for raising revenue, including a graduated income tax proposed in the Senate, or House Speaker Michael Madigan's recent push to tax Illinois residents who make more than $1 million.

"If action is not taken to stabilize our revenue code, extreme and radical cuts will be imposed on education and critical public services," Quinn said in the roughly 30-minute address before lawmakers. "Cuts that will starve our schools and result in mass teacher layoffs, larger class sizes and higher property taxes."

The question of what to do with the expiring income tax has nagged lawmakers and those running for office for months.

However, Quinn and state agencies have predicted dire cuts for weeks if tax cut rollback begins in January as scheduled, cutting roughly $1.6 billion in revenue.

Quinn said without the increase there would be about 13,000 teachers laid off, 41,000 fewer children in child care, 21,000 elderly people losing their in-home care and 11,000 victims of domestic abuse not receiving shelter or assistance.

He said maintaining the tax rate would be a "hard choice" but vowed not to institute any new taxes on "everyday services" that working people rely on. He said he'd like to double the state's earned income tax credit, to help poor families keep more of what they earn, over the next five years.

Quinn, D-Chicago, faces re-election in what's likely to be one of the fiercest campaigns nationwide with a challenge from Republican businessman Bruce Rauner.

"After five years of Pat Quinn's failed leadership, we have record tax hikes, outrageously high unemployment, massive cuts in education, and there's still a giant budget mess in Springfield," Rauner said. "We can balance the budget without more tax increases, if we create a growth economy, and restructure and reform our broken government."

Rauner released an Internet ad Tuesday accusing Quinn of breaking his promises. It noted that the state still has a multibillion-dollar backlog of bills, despite pledges by Quinn and other Democrats to use the 67 percent tax hike to pay down that debt.

None of the options for approaching Illinois' financial future -- from extending the increase to letting it sunset or approving a new tax on millionaires -- will be politically easy or resolve all the issues. In addition to the bill backlog, Illinois has the nation's lowest credit rating and uncertainty with its pension debt.

Quinn briefly recapped his signing of a landmark pension overhaul, which he's called one of his biggest accomplishments. But the proposed budget won't contain the estimated savings. The overhaul that cuts benefits for state employees and retirees is undergoing a legal challenge by unions that contend it's unconstitutional.

It will be difficult to garner public support for any tax increase. A poll this week by the Paul Simon Public Policy Institute at Southern Illinois University showed more than half of Illinois voters prefer cutting existing spending over approving new revenue, though about 28 percent said it should be a combination of the two. The survey interviewed 1,001 registered voters by phone from Feb. 12-25. The margin of error was plus or minus 3.5 percentage points.

Quinn called his approach "honest and responsible."

He also mentioned past decisions to close facilities and cut spending. He did not mention any of the specific facilities, including the Warren G. Murray Developmental Center in Centralia, by name.

Quinn said his plan includes these expenditures for education:

* Investing $1.5 billion in the Birth to Five initiative that focuses on prenatal care, access to early learning opportunities and parental support.

* Doubling the state's investment in Monetary Assistance Program scholarships to expand opportunity for students in need to attend college.

* Modernizing classrooms across the state.

* A $6 billion increase in classroom spending over the next five years, doubling the investment in college scholarships for students in need and increasing access to higher education through dual enrollment and early college programs. Over the next five years, the plan brings classroom funding to the highest levels in Illinois history, according to Quinn.

Other metro-east lawmakers' responses to Quinn's plan:

* Rep. Charlie Meier, R-Okawville: "Quinn claims to have rooted out waste and abuse, but he continues to abuse the Murray residents and their families, denying them a choice on where to receive the quality of care they need. Illinois still has (billions) in unpaid bills, and yet our governor chooses to spend more money. His actions speak for itself. Don't let the governor's rhetoric fool you, he has proven the more money he gets, the more he spends."

* Rep. Dwight Kay, R-Glen Carbon: "Statistics show Illinois continues to lose jobs as a result of the 67 percent income tax hike approved the day before I first took office in 2011. Illinois needs more jobs which will generate revenue for Illinois, not more taxes. Over 570,000 people are out of work in Illinois today; keeping the 67 percent income tax hike permanent is not the solution for putting people back to work. Unfortunately, our governor does not recognize that currently in Illinois jobs equal revenue and more taxes lead to fewer jobs."

* Sen. Dave Luechtefeld, R-Okawville: "The governor stood before the General Assembly and stated that he needed more money, even after he and the majority party levied a $26 billion tax increase on the public back in 2011. The governor, House speaker and Senate president all promised that the tax increase would be temporary and was needed to pay down the state's backlog of bills. A significant portion of that $26 billion was intended to be for education and higher education; however, those monies haven't made it into the classroom. Five years later, Illinois is in worse shape than when Gov. Quinn took over. It is a bit of a stretch to assume that the Governor and majority parties will do the right thing with a permanent tax increase. I hope the public sees this for what it is - a charade of the highest degree."

Lawmakers must approve a budget for the new fiscal year, which starts July 1, by the end of May.

Contact reporter Brian Brueggemann at bbrueggemann@bnd.com or 239-2511. The Associated Press contributed to this report.

Contact reporter Brian Brueggemann at bbrueggemann@bnd.com or 239-2511. The Associated Press contributed to this report.

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