Illinois House Approves Historic 32% Tax Increase, Governor Vows Veto

With Illinois, which on Saturday morning entered its third fiscal year without a budget, facing a catastrophic downgrade, late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse. The bill passed 72-45. The House also approved a $36 billion spending plan minutes later on a 81-34 vote. According to the Sun Times, it cleared an initial hurdle on Friday with 23 Republicans voting “yes.”

“While no one could say this was an easy decision, it was the right decision,” House Speaker Mike Madigan said after the spending bill vote. “There is more work to be done.” Dems said they would work with Republicans on other resolution of other issues on table.

The proposed tax increase will now head back to the Illinois Senate, which approved a revenue bill on May 23 with all Democratic votes as part of its “grand bargain” package. But Governor Bruce Rauner has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions.

Commenting on the just passed House bill, Rauner said he’ll veto the revenue bill.

I will veto Mike Madigan’s permanent 32% tax hike. Illinois families don’t deserve to have more of the hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs,” Rauner said.

“Illinois families deserve more jobs, property tax relief and term limits. But tonight they got more of the same." He also said in an emailed statement that “if the legislature is willing to pass the largest tax hike in state history with no reforms, then we must engage citizens and redouble our efforts to change the state."

Some commentators promptly countered that Rauner's veto will likely be overriden.

The tax bill passed with some essential Republican support: it needed 71 votes. But Illinois House Republican Leader Jim Durkin questioned how it will address the state’s $14 billion backlog. Durkin is seeking to get Rauner the “balanced budget package,” he wants, which includes spending reductions and “meaningful reforms.”

“I am disappointed that we’re taking this up at this moment when there has been significant, significant progress to address the priorities of the governor and also the priorities of this caucus,” Durkin said.

 

There are, of course, political ramifications to supporting a tax hike, on both sides of the aisle. Some House Democrats were expected to vote no to try to shield themselves from Illinois Republican Party attacks in next year’s election. But some House Republicans, knowing they’d too be targeted for supporting it. said there’s no other choice.

Others were even more fatalistic: “If I lose my seat so be it,” state Rep. Michael Unes, R-Pekin said, adding the state shouldn’t have gotten so close to a financial collapse. “Without this, we will lose thousands of lives and thousands of jobs and the alternative is so much worse. I don’t like this. This is not easy. This is really, really difficult,” Unes said. “But the alternative is much worse than this. The alternative is literally taking our state off the cliff.”

David Harris was among the Republicans who supported the bill, while also urging the governor to sign the revenue and spending bills if passed: “Have the courage to do what is right and bring this madness to an end.” 

“I was not elected as a state legislator to help preside over the financial destruction of this great state,” Harris said. “I respect my colleagues who are voting no. But to me, enough is enough.”

Meanwhile, changes made by House Democrats from the original Senate bill include the removal of streaming and satellite fees. It also closed corporate tax loopholes, increased the earned income tax credit, and restored the research and development and manufacturers’ tax credit to attract more businesses.

House Democrats filed amendments to both the tax and spending measures on Sunday, which included nearly $400 million more in cuts. Although some House Republicans voiced frustrations over changes, House Democrats said they were reflective of topics discussed during negotiations.

It is unclear if the passed tax increase will be sufficient to placate S&P. Recall July 1 was the date when the credit agencies said they would drop the state to “junk” status without a budget. Ultimately, the fate of Illinois' credit rating is now in the hands of Rauner, and whether and how fast his imminent veto is overriden.

Ultimately, Illinois faces a lose-lose dilemma: get junked and see its funding costs soar, or save its lowest possible investment grade rating, and watch as what is already the worst metropolitan exodus (recently the population of Chicago shrank the most of any US city), go into overdrive as tens of thousands more scramble to escape the state's soaring tax rates.

Comments

chubbar xtremers9 (not verified) Mon, 07/03/2017 - 07:30 Permalink

This is amazing to me. So essentially what the democrats and some republicans are saying is that they are unable to identify ANY spending cuts in the current budget? How about just going back in time to when the budget was balanced and the income reflected what they are currently experiencing? Use that budget and cut out everything that was enacted since. These people are completely out of their minds and it doesn't bode well for all of us going forward when they can't even consider spending cuts.

In reply to by xtremers9 (not verified)

MoreFreedom charlewar Mon, 07/03/2017 - 00:11 Permalink

The welfare queens will move to the states with the most welfare, especially when the welfare in their state is cut.It's the true race to the bottom.  It's where two wolves and a sheep vote on what's for dinner.  I prefer states where it's illegal to vote on eating others for dinner, and everyone how to earn their own dinner without the use of government to get it for them.

In reply to by charlewar

chubbar Cman5000 Mon, 07/03/2017 - 07:35 Permalink

Minnesota has other problems now. Rapefugees are being imported by the busload and the gov't is completely co-opted by the libtards. I fully expect this state to go the same way that Chicago is going. It never seems to occur to any of these fucking assholes in gov't that the taxpayer has limited funds with which to support the state whereas there are an unlimited number of ways to spend funds and the gov't appears to be determined to explore every one of them.

In reply to by Cman5000

GunnerySgtHartman G-R-U-N-T Sun, 07/02/2017 - 23:22 Permalink

Others were even more fatalistic: “If I lose my seat so be it,” state Rep. Michael Unes, R-Pekin said, adding the state shouldn’t have gotten so close to a financial collapse. “Without this, we will lose thousands of lives and thousands of jobs and the alternative is so much worse. I don’t like this. This is not easy. This is really, really difficult,” Unes said. “But the alternative is much worse than this. The alternative is literally taking our state off the cliff.”Let me get this straight: raising taxes is now a life-and-death issue in Illinois?  Life-and-death for who?  Politicians?  And this tool thinks that raising taxes is going to SAVE jobs?  WTF???Illinois has already gone off the cliff.  The question is what will be left after it hits bottom.

In reply to by G-R-U-N-T

chubbar dark pools of soros Mon, 07/03/2017 - 07:41 Permalink

Not for long. The pension funds are based on a ponzi that requires funding every year. As the tax base shrinks every year due to these morons and their tax policies, it will become harder and harder to support the current gov workers and their pensions. What they are doing now is unsustainable and is putting these pensions at greater risk. Of course the union leadership doesn't see it that way and won't take the charge in making sustainable changes to the pension plans. So what is going to happen is that the retirees will get 100% of promised pension benefits until the state goes BK, then who knows what they will get. It's a pretty big gamble.

In reply to by dark pools of soros

HungryPorkChop A Nanny Moose Sun, 07/02/2017 - 23:32 Permalink

Business and personal tax have already hit the ceiling of dimishing returns.  Raise taxes all you want but the actual revenue will not increase or it will be just a short term gain for a year until the effects are felt.  What they will quickly find is businesses and middle class start to flee at an ever increasing rate.  Can you say words like Puerto Rico and Greece?

In reply to by A Nanny Moose

serotonindumptruck bigdumbnugly Sun, 07/02/2017 - 22:39 Permalink

Yeah, it's known as "kicking the can" down the road to perpetuate this absurdity into infinity.As a hypothetical, if you were an elected politician in a state such as Illinois, and you were guaranteed a fluctuating high rate of income for the rest of your natural life, would you vote against such a proposal?That's a difficult question for many people to answer honestly.Vote against the resolution and be blacklisted, shunned, and disavowed by everyone that you ever knew in your professional life, and be bankrupt, or vote in favor of the resolution and continue to pretend that everything is just hunky-dory.

In reply to by bigdumbnugly

nmewn Sun, 07/02/2017 - 22:13 Permalink

RAISE-TAXATION-ON-WORKERS-THIRTY-TWO-PERCENT.lol...and its...wait for it..."historic"...yeah, no problem, the shit grows on trees and it'll be "historic" alright down the road ;-)