Illinois Republicans’ budget plan hikes taxes by $5 billion

Craig Lesner

Budget and Tax Research Director

Craig Lesner

John Klingner

Policy Analyst

John Klingner
June 14, 2017

Illinois Republicans’ budget plan hikes taxes by $5 billion

The Republican plan hits Illinoisans in fiscal year 2018 with the same $5 billion-plus tax hike from the “grand bargain” plan that failed in May. That plan starts with a 33 percent income tax increase, and includes questionable new taxes on services such as Netflix, laundry services and more.

Republican state lawmakers announced the newest attempt to solve Illinois’ budget crisis June 14.

But this latest budget proposal is nothing new. Like the “grand bargain,” the Brady plan, and Senate Democrat’s budget before it, the GOP plan relies on $5 billion in new tax revenues because it includes no significant structural spending reforms.

Republicans presented the plan as the latest and best chance to reach bipartisan consensus in the near future. Now that any legislation requires approval of a three-fifths majority in both the House of Representatives and Senate to move to the governor’s desk, both political parties must support the plan if it is to pass.

If successful, state lawmakers will claim victory, declaring the budget crisis resolved. Meanwhile, the financial crisis will continue for Illinoisans, who already pay the highest property taxes in the country.

The Republican plan hits Illinoisans in fiscal year 2018 with the same $5 billion-plus tax hike contained in the “grand bargain” plan that failed in May. That plan starts with a 33 percent income tax increase, and includes questionable new taxes on services such as Netflix, laundry services and more.

The plan:

  • Amends Senate Bill 9 to change the permanent income tax hike to a temporary, four-year increase contingent on a four-year property tax freeze.
  • Hikes personal and corporate income taxes by $5 billion. The personal income tax rate increases to 4.95 percent from the current 3.75 percent rate. The corporate income tax rate rises to 7 percent from the current 5.25 percent rate.
  • Expands the sales tax to laundry and dry-cleaning services, as well as storage and other services to bring in an estimated $55 million.
  • Raises an estimated $54 million in new cable and satellite TV taxes.
  • Closes corporate income tax loopholes worth an estimated $125 million.

The total $5.4 billion tax hike means each Illinois household would eventually have to pay $1,125 in additional taxes annually.

Illinoisans don’t need, nor can they afford, the Republican’s “compromise” plan.

Every one of Illinois politicians’ past deals – from former Gov. Jim Edgar’s pension ramp to former Gov. Rod Blagojevich’s pension bonds to former Gov. Pat Quinn’s temporary tax hike – has something in common: they all avoided fixing Illinois’ structural spending problems, instead sending the bill to taxpayers instead.

Thirty years of continued reliance on tax increases and debt instead of reforms is why Illinois has perpetually teetered on a financial cliff and its credit rating stands at the precipice of junk.

Illinoisans want a different deal. Nearly 80 percent of Illinoisans agree that “Illinois state lawmakers should pass major structural reforms before passing any tax increase,” according to a recent poll conducted by Fabrizio, Lee & Associates and commissioned by the Illinois Policy Institute.

Illinoisans need a budget that enacts commonsense spending and economic reforms without harmful and counterproductive tax hikes.

The Illinois Policy Institute has provided a reform road map – Budget Solutions 2018 – that does exactly what is needed.

The plan provides tax relief to struggling homeowners through a comprehensive property tax reform package, begins an end to the pension crisis through 401(k)-style plans, and makes changes to curb bloated administrative expenses in higher education.

Most importantly, this plan doesn’t punish taxpayers for the political failures of the past few decades.

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