3/26/2014 1:33:00 PM Quinn: make income tax permanent
SPRINGFIELD, Ill. (AP) — Gov. Pat Quinn outlined his case Wednesday for making Illinois’ temporary income tax increase permanent, predicting “extreme and radical” budget cuts to schools and services without “stabilized” revenue.
The Chicago Democrat — embarking on what’s expected to be a difficult re-election bid against Republican businessman Bruce Rauner— tied the idea to relief for homeowners, saying he’d like to guarantee every Illinois homeowner a $500 annual refund. He also called for increasing the earned income tax credit for low-income families.
“If action is not taken to stabilize our revenue code, extreme and radical cuts will be imposed on education and critical public services,” he said in the roughly 30-minute address before lawmakers. “Cuts that will starve our schools and result in mass teacher layoffs, larger class sizes and higher property taxes.”
The question of what to do with the expiring income tax has nagged lawmakers and those running for office for months. The state’s roughly 67 percent income tax increase was approved in 2011 and starts to roll back in January, leaving a roughly $1.6 billion revenue drop.
State agencies have been bracing for dire cuts, and top lawmakers have been warning of tough choices.
Quinn, who reviewed the difficult budget cuts of years past, previewed more difficult choices in his address, saying that without the increase there would be about 13,000 Illinois teachers laid off, 41,000 fewer children in child care and 11,000 victims of domestic abuse not receiving shelter or assistance.
He said “maintaining” the tax rate would be a “hard choice” but he vowed not to institute any new taxes on “everyday services” that working people relied on. He said he’d like to double the state’s earned income tax credit, to help poor families keep more of what they earn, over the next five years.
Quinn’s speech comes at a critical moment with his re-election bid against Rauner and immense financial challenges, including billions in unpaid bills and uncertainty with pension debt.
Ahead of the speech, Rauner’s campaign already had called Quinn’s plan to keep the tax increase “the ultimate broken promise.” On Tuesday, Rauner released an Internet ad noting Illinois still has a multibillion dollar backlog of bills, despite pledges by Quinn and other Democrats to use the tax hike to pay down that debt.
The November contest against Rauner, who’s made criticizing Quinn’s leadership a cornerstone of his campaign, will determine if Quinn gets a second full term. Already the budget has been viewed through an election-year lens. Initially planned for last month, Quinn asked lawmakers to move it until after the primary election so he could have more time to prepare a five-year blueprint for spending. Republicans accused him of playing politics so he could see who would be his primary challenger.
Republicans and business groups have already vowed to fight any extension of the temporary income tax hike and claim state agency testimony predicting dire cuts has been overblown to justify an increase. They’ve called for cutting spending and limiting new programs.
None of the options for approaching Illinois’ financial future — from extending the increase to letting it sunset or approving a new tax on millionaires — will be politically easy or resolve all the issues. In addition to the bill backlog, Illinois has the nation’s lowest credit rating and uncertainty with its pension debt.
Quinn briefly recap his signing of a landmark pension overhaul, which he’s called one of his biggest accomplishments. But the proposed budget won’t contain the estimated savings. The overhaul that cuts benefits for state employees and retirees is undergoing a legal challenge by unions who contend it’s unconstitutional.
Getting public support for extending the increase will be difficult.
A poll this week by the Paul Simon Public Policy Institute at Southern Illinois University showed more than half of Illinois voters prefer cutting existing spending over approving new revenue, though about 28 percent said it should be a combination of the two. The survey interviewed 1,001 registered voters by phone from Feb. 12-25. The margin of error was plus or minus 3.5 percentage points.
Lawmakers must approve a budget for the new fiscal year, which starts July 1, by the end of May.