The Taxman Cometh?


At a shoe-shine stand in the Loop on Friday, a retiree from Chicago's Beverly neighborhood bristled about the prospect of getting waxed even more by the taxman.

"I feel as if we pay enough," Tommy Taylor, Jr. said simply.

Under a deal brokered Thursday night between leading Democratic lawmakers and Gov. Pat Quinn, the Illinois state income tax would surge in 2011 from 3 to 5.25 percent.

The proposal would also increase the tax on cigarettes, now $.98 per pack, full dollar.  The money, legislators say, would be used strictly for education.

It's estimated the higher taxes would bring in about $7.5 billion a year.

The income tax increase would mean that a married couple with two kids, earning $80,000 a year combined, would pay $1,620 in higher taxes. That’s on top of the $2,160 they’re already paying.

"This is not the time to be raising taxes," said Daniel Anthony with the Illinois Policy Institute.  "The average, hard-working citizen of Illinois. they will feel this the most."

It’s hard to find any love out there for the tax hike, especially in the business world, since the proposal calls for a huge bump in the corporate tax rate, taking it to a nation-leading 10.9 percent.

But Democratic leaders say the plan would pull the state out of its $15 billion budget hole.  They promise the tax hike would last just four years, and then fall to 3.75 percent.

"This is like giving a crack cocaine user more crack cocaine. This is unacceptable," said Anthony. "They say this is temporary.  Didn’t they say that about the tolls?" 

The president of The Civic Foundation, one of the state's foremost tax watchdogs, calls the plan "fiscally irresponsible," because it doesn’t include spending cuts. And proposes as much as 12 billion dollars in new borrowing.

"If you don’t stop all this borrowing, and if you don’t use the new tax revenues for paying down the unpaid bills, you’re not fixing the problem. We could just as easily with this enormous tax increase be back in this same situations two or three years from now," said Lawrence Msall.

Democrats seem willing to take that gamble. There's widespread support for the tax hike in the State Senate, less so in the House.
The votes just weren't there on Friday, so the House decided to break until Sunday to give the Democratic leadership two more days to rally support. 

Quinn, House Speaker Michael Madigan and Senate President John Cullerton all hope the General Assembly passes the proposal by the end of the current session that ends Jan 12.  After that, they lose some of their Democratic majority.

How Much Would Your Tax Increase?  Use the Quinn Income Tax Hike Calculator

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