Monday 23rd October 2017

Senate Democrats approve $5.4 billion in tax increases

Senate Democrats approve $5.4 billion in tax increases; GOP Rep. Ives takes control of bill in House

  • By Greg Bishop and Dan McCaleb
  • Updated

ILLINOIS NEWS NETWORK

Illinois Senate Democrats on Tuesday approved $5.4 billion in tax increases with no Republican support, including an income tax hike that would be made retroactive to Jan. 1.

The new revenue would help offset a $37.3 budget plan that also was approved by the Senate Tuesday, which adds more spending to the version passed last week.

Both the tax increase and the spending bills are part of the Senate’s so-called grand bargain, a series of budget-related measures that senators of both parties had been negotiating for months.

In addition to raising the state’s income tax from 3.75 percent to 4.95 percent, the tax hike bill also would raise the corporate tax from 5.25 percent to 7 percent and expand the state’s sales tax to include certain services.

Because the income tax increase would be retroactive to the beginning of the year, the effective 2017 tax rate would be 5.81 percent if it were to take effect June 1.

A family with annual income of $60,000 would pay $3,486 in state income taxes in 2017, up $1,236 from the current rate. Families with the same income would pay $290 a month for the remainder of this year, including the retroactive portion, up from $187 monthly.

The vote in the Senate was 32-26, with no Republican support. It faces an uncertain future in the House, where anti-tax-hike Republican Rep. Jeanne Ives filed as chief sponsor.

“I prefiled for the bill so I could control it in the House,” Ives told Illinois News Network. “I think that there’s a bigger conversation that needs to be had before we do a tax increase. … I thought the best way to have a voice in that discussion would be to control the bill in the House.”

Ives acknowledged that there are procedural ways for Democrats to take the bill away from her, but she hopes that doesn’t happen.

“There are a lot of tax increases in here that we shouldn’t even be having a conversation about until we’ve talked about cutting spending and doing more for the business community rather than making them the highest taxed in the United States,” she said.

Gov Bruce Rauner has said he would not support the tax increases if there is no corresponding property tax freeze. So far, there’s not.

“The biggest issue that now stands in the way of us reaching an agreement is resistance to freezing your property taxes, and giving you the ability to control whether your property taxes go up or down in the future,” Rauner said in a Facebook Live event earlier Tuesday. “We will always stand on the side of taxpayers and homeowners and make sure we get an agreement that is fair to you.”

Initially, the grand bargain bills were tied together. If one failed, they all failed.

Last week, Democrats stopped negotiating with Republicans and started decoupling the grand bargain bills, passing several pieces of legislation with little or no GOP support.

State Sen. Toi Hutchinson, D-Olympia Fields, sponsors the $5.4 billion tax increase. She said the bill has been amended many times, proving that Democrats were willing to compromise with Republicans.

“Home repair has been removed, landscaping has been removed, personal services except for tattoos and piercings have been removed,” Hutchinson said of the sales tax expansion measure. “We need to figure out how to pass a revenue package that can pay for the core services of government. That’s the end-all game.”

Sen. Kyle McCarter, R-Lebanon, said the retroactive income tax increase will be especially hard on families.

“This will make it a tough six months, last part of the year,” McCarter said. “This is going to come to people in twice the punishment.”

McCarter said he also worries that the $5.4 billion tax increase will turn into a $7 billion tax increase before lawmakers are through.

“It seems like not everybody wants to show you the whole picture, because the whole picture is this: for every one dollar we’re not willing to cut, we have to take from the taxpayers in the form of a new tax,” he said. “It’s not just revenue. These are dollars out of people’s pockets. So every time we are not able to courageously tell people ‘no,’ tell constituents ‘we just can’t afford this,’ we have to go to the taxpayers to take more from them, dollar for dollar.”

The Senate also approved an appropriations bill Tuesday that Democrats say cuts $3 billion in spending and a budget implementation bill that fell a few votes short of passage last week.

But the budget bill approved Tuesday actually adds more spending than a version that passed last week.

State Sen. Heather Steans, D-Chicago, said the latest budget bill keeps level spending for the local government distributive fund despite a 10 percent reduction passing the Senate last week. The bill also does not reduce Medicaid spending or the Community Care Program.

Steans said the amendment does include over a billion dollars in savings for pension reform. There’s also nearly half a billion dollars in savings from state employee group health insurance, but that’s pending court action on the labor dispute between the governor and AFSCME union. If the court sides with AFSCME, Steans said there would be fund sweeps.

Also on Tuesday, the Senate introduced two proposed amendments to the state’s Constitution that would allow for a progressive income tax.

The Constitution prescribes a flat income tax, regardless what the rate is. A progressive tax would allow lawmakers to create tiered rates depending on an individual’s income level.

The proposed amendments were read for the first time Tuesday, meaning two more readings are necessary before a vote can take place.

While the Senate has enough Democrat votes to override any Rauner vetoes, the House does not.

In a statement released shortly after the Senate votes, House Speaker Michael Madigan said his chamber will “thoughtfully” consider the measures.

“Since the beginning of the session, a working group … has worked diligently on state budget issues, including passage of a Lifeline Budget,” Madigan said. “They will thoroughly review the Senate’s proposal and consider it as part of our efforts to pass a full-year balanced budget that will end the budget impasse.”

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