SPRINGFIELD — The Illinois Senate missed a deadline Tuesday for replacing the state's flat income-tax rate with a progressive tax that would have charged a higher rate for higher incomes.
Sen. Don Harmon, D-Oak Park, had planned to call for a vote on a measure which would have started the process of holding a statewide referendum in November on changing the tax structure. The Senate needed to vote by Tuesday to put the measure on the ballot. The measure also would have needed passage in the House.
Harmon had said there were enough votes in the Senate for passage, but perhaps not in the House. And some Senate Democrats didn't want to give their support to a tax increase without some assurance that the House would do the same.
The plan would have needed 71 votes for passage in the House, meaning at least a few Republicans would have to support it. GOP House members from the metro-east said they and their Republican colleagues were united in opposition to the plan.
Sen. Kyle McCarter, a Lebanon Republican, said Democratic House Speaker Michael Madigan may have determined that the plan was doomed in the House.
"I'm guessing Madigan told Harmon that it wasn't going anywhere," McCarter said.
Harmon said more work is needed to convince legislators to back the plan, which supporters dubbed the Fair Tax. He said the tax vote is a "big decision" that requires "more time and education" before it's approved.
"The Fair Tax has gained significant momentum in the last year, and I'm committed to continuing to work to get this passed in the fall veto session later this year," Harmon said. "Our caucus remains committed to this issue as we believe that the Fair Tax is the best way to provide tax relief to the middle class while protecting our priorities."
Proponents said the plan would give a tax cut to 94 percent of Illinoisans. But opponents argued it's a deceptive cut -- a cut only in comparison to the current tax rate, which includes a temporary tax hike.
The temporary, 67 percent hike in the current flat rate is supposed to go away in January. Opponents of the progressive tax say it was just a sneaky way of making permanent the temporary tax increase.
Here's how the progressive tax would have worked:
* The first $12,500 in income that a person earns would be taxed at 2.9 percent.
* Income on top of that, up to $180,000, would be taxed at 4.9 percent.
* Any income above $180,000 would be taxed at 6.9 percent.
The state's current tax rate is 5 percent. But it's scheduled to drop back down to 3.75 percent in January, when the temporary tax sunsets. So in actuality, if the progressive tax were to take effect, most workers would have been charged a higher tax rate --compared to the 3.75 percent that's scheduled to take effect in January.
The temporary tax hike is equal to a week of pay. It was approved in 2011 as a temporary fix to generate $31 billion for paying off backlogged bills. But most of the revenue went toward employee pension funds and interest payments. Even with the cash infusion, the state still has a $3 billion budget gap.
The progressive tax was supported by public employee unions. Proponents also argued that it is more fair to the poor, because they have to spend a greater portion of their income on necessities.
Democratic Gov. Pat Quinn and Democratic leaders in the legislature warn there will be severe cuts to state services -- such as prison closings and massive teacher layoffs -- if the temporary tax hike isn't extended or replaced with some other tax increase.
McCarter said he now expects a full-on push from Democrats to extend the temporary tax.
"I'm sure of that. They have to, because they're not showing any desire to reduce their spending," McCarter said.
Contact reporter Brian Brueggemann at firstname.lastname@example.org or 239-2511.