Madigan’s spending plan is unreasonable

Craig Lesner

Budget and Tax Research Director

Craig Lesner
June 29, 2017

Madigan’s spending plan is unreasonable

Like the “grand bargain,” the Brady plan and the Illinois Senate Democrats’ budget before it, the Illinois House Democrats’ plan relies on more than $5 billion in new tax revenues because it includes no significant structural spending reforms.

Illinois House Speaker Mike Madigan has for the first time officially presented a fiscal year 2018 budget plan, which spends $36.5 billion. Madigan’s plan overspends by over $5 billion more than what Illinois currently takes in revenues.

Like the “grand bargain,” the Brady plan and the Illinois Senate Democrats’ budget before it, the House Democrats’ plan relies on more than $5 billion in new tax revenues because it includes no significant structural spending reforms.

Madigan’s plan is not the solution to the state’s budget crisis.

Illinois’ finances are out of whack because state lawmakers have allowed costs to grow higher than what Illinoisans can afford.

Spending reforms are the only way to truly balance the state’s budget. Pensions consume more than 25 percent of Illinois’ budget, cutting into spending for social services and nearly every other core government service. Workers’ compensation costs are still the seventh-highest in the nation and are chasing companies out of Illinois. Illinois’ public colleges and universities spend more on administration and pensions than on classrooms. And property taxes are already the highest in the nation. There is plenty to reform.

Yet instead of doing their jobs, lawmakers want taxpayers to pay more.

Although Madigan’s plan doesn’t yet have its own revenue component, the Democrats expect to “live within the confines” of the more than $5 billion in new revenues contained in Senate Bill 9.

Approved by state senators in May, SB 9:

  • Hikes personal and corporate income taxes by $5 billion. The personal income tax rate would increase to 4.95 percent from the current 3.75 percent rate. The corporate income tax rate would rise 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 as much as $300 million. (The sales tax expansion might not be included in the final plan.)
  • Raises an estimated $54 million in new cable and satellite TV taxes.
  • Closes corporate income tax loopholes worth an estimated $125 million.

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

State lawmakers want Illinoisans to believe this is a reasonable compromise to end the state’s budget crisis.

But Illinoisans already pay some of the highest taxes in the nation, and they face the highest burden when it comes to property taxes.

When taxes are added up, the median U.S. household in Illinois pays the highest effective total state and local tax rate, according to a 2017 WalletHub report.

At the press conference unveiling his plan, Madigan said that only when the governor “is reasonable” – meaning when he agrees to tax hikes and drops the remainder of his “Turnaround Agenda” – will the state’s two-year budget crisis end.

But the speaker of the House is the one who needs to be more reasonable. Rauner has already largely given up on his 44-point Turnaround Agenda. Most of his demands have been eliminated, while others have become so watered-down through negotiations they are now useless for fixing the state’s problems.

“Reasonable” deals are what created the state’s financial crisis in the first place.

From former Gov. Jim Edgar’s pension ramp to former Gov. Rod Blagojevich’s pension bonds to former Gov. Pat Quinn’s temporary income tax hike, Madigan as House speaker signed off on numerous “reforms” that avoided fixing Illinois’ structural spending problems. These types of Band-Aids merely delayed Illinois’ day of reckoning and punished taxpayers.

Illinoisans don’t need or want any more “reasonable” deals that burden them with ever-higher taxes and ignore needed reforms.

Nearly two-thirds of Illinois voters don’t want an income tax hike as part of the state budget, according to a survey conducted by Fabrizio, Lee & Associates and commissioned by the Illinois Policy Institute.

State lawmakers need to pass a balanced budget that actually solves the state’s structural problems without tax hikes.

The Illinois Policy Institute has provided a reform plan – Budget Solutions 2018 – that does just that.
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 and state government.

Those are the truly reasonable reforms Illinoisans need.

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