In the tense final hours of the Illinois General Assembly’s regular session, the state House rejected a $3 billion income tax increase on May 31 by a nearly 2-1 margin.
The two-year, 50 percent income tax rate increase had been championed by Illinois Gov. Pat Quinn (D) as a way of partially filling an $11 billion multi-year budget deficit.
Before adjourning, the General Assembly sent a half-year budget to Quinn’s desk. Legislators are expected to return this summer or fall to act on a full-year spending plan.
Procedural rules governing Illinois’ budget process mean the support of a supermajority of legislators will be needed to pass a revenue increase. Prior to June 1, only a simple majority was required.
Democrats Join GOP Opposition
Forty-two legislators voted for the tax hike, with 74 voting against. No Republican representatives voted in favor of the tax hike; 26 Democrats joined in opposition to the bill.
Most political observers had expected a tax hike to pass in some form. The defeat was a stunning reversal of fortune for plans to bring in new revenue.
“Raising the Illinois income tax burden on our citizens without analyzing the programs and policies which have created the state’s fiscal mess of overspending our revenues will only put us deeper in debt,” said Rep. Jil Tracy (R-Quincy).
Even as the House voted down a tax increase, the state Senate approved a costlier revenue bill by a vote of 31 to 27. The Senate’s plan, championed by state Sen. James Meeks (D-Chicago), included a 67 percent income tax rate increase and an expansion of the sales tax to 39 previously exempt services, such as video rentals.
“Illinois lawmakers need to remember it is the small business community keeping this recession from getting any worse than it already is,” said Kim Clarke Maisch, state director for the National Federation of Independent Business/Illinois. “To now target them through a service tax, which disproportionately hurts small employers, sends the message that Illinois is not interested in creating jobs or helping our struggling businesses.”
Pols Cited Economy, Election
The troubled economy—as well as the potential of facing voter wrath in legislative elections in 2010—led many lawmakers to oppose the revenue grab.
“If we don’t use this crisis to wring out ineffective and wasteful spending, we never will,” said Rep. Bob Pritchard (R-Sycamore). “Millions are still significant to me. We also don’t have any assurance, as in the past, as to how the revenue will be spent. We must pay down debt, pensions, and [other] commitments.”
Pritchard added, “Extra revenue always leads to extra [new] programs. How about debating priorities for a change, and [defining] essential government services?”
Before the tax hike vote, Quinn released a dramatic “doomsday” scenario that slashed state spending by $7.5 billion, more than twice the amount needed to offset his income tax increases.
Fear Tactics Fail
Outside observers noted Quinn’s “doomsday” cuts went far beyond what was needed to balance the budget without tax hikes. Said John Tillman of the Illinois Policy Institute, a state-based think tank, “He’s using fear tactics to try to scare the average person in Illinois. Any governor that would let prisoners out of prison as his first cut ought to rethink whether he’s qualified for that job.”
The institute countered Quinn’s “doomsday” budget with a menu of spending reduction options that would balance the budget without tax increases or drastic cuts. Ideas proffered by the institute included reducing the 10 percent share of state income tax receipts given directly to localities, reducing public employee pay, and rolling back any 2010 departmental spending increases to the lower 2009 allocation.
Other policy research organizations, including the Chicago-based Civic Federation, also produced reports with suggestions for state pension reform and other measures to plug the state budget hole without the need for sharp tax increases.
“We have an opportunity to reform our state’s policies and create a new era of fiscal responsibility and transparent government,” Tracy said. “The public must demand it.”
Kristina Rasmussen ([email protected]) is executive vice president of the Illinois Policy Institute.