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Tax increase, impact, dominate Illinois Capitol in 2011

 

By Benjamin Yount | Illinois Statehouse News

SPRINGFIELD — Call it the year of the tax increase.

Illinois‘ tax increase vote in January dominated this year’s session here.

Illinois Statehouse News takes a look back at the year, taking stock of the work from state lawmakers. Our year in review looks at the abolition of the death penalty, workers’ compensation reform, education reform, and of course the tax hike and its impact.

Tax hike

The 96th General Assembly ended its time in office with the lame duck vote on Jan. 12 to raise Illinois’ personal income tax 67 percent and the state’s corporate income tax 47 percent.

A day later the 97th General Assembly was sworn into office, and state Sen. Matt Murphy, R-Paletine, said the lawmakers did not stop fighting over the tax hike vote all year.

“I think the tax increase, and the job loss that it’s created, is the seminal event of coming out of Springfield this year,” Murphy said.

Personal income tax rates went from a flat rate of 3 percent to 5 percent. For a family of four earning $40,000, that would amount to an extra $800. The corporate income tax went from a flat rate of 4.9 percent to 7 percent, but its impact proved difficult to predict.

State Sen. Toi Hutchinson, D-Olympia Fields, said 60 percent of businesses in the state do not pay the corporate income taxes, but those that do “often pay a lot.”

Both increases went into effect immediately. Original estimates projected the state would rake in more than $6 billion annually.

Verschoore and other Democrats said Illinois was out of options to deal with its fiscal crisis and needed the tax increase to avoid more serious fiscal problems.

Both the personal and corporate increases are scheduled to last only four years. Families were told their tax rate would roll back to 3.25 percent, but that would be up to a new Legislature.

However, the last time a temporary tax was approved, it became permanent in 1990.

House Republican Leader Tom Cross, R-Oswego, had pointed to that example, saying the notion of a temporary increase is “clearly false.”

“You’re setting up a scenario in 2015 when this tax is supposed to revert back; the base is going to be so high that you can’t do it. It’s kind of absurd,” he said.

David Vaught, Gov. Pat Quinn’s budget director, said Illinois’ fiscal health is contingent on the tax increase.

Death penalty abolition

Illinois became the 16th state to abolish the death penalty, but it was not a quick process. Lawmakers voted to end executions Jan. 16. However, Quinn, a Democrat, didn’t sign the historic legislation until March 9.

Former Republican Gov. George Ryan placed a moratorium on the death penalty in 2000, following news reports of innocent people serving on death row. Three years later, Ryan commuted the death sentences of 167 inmates to life in prison.

Hutchinson had said Illinois’ system was broken.

“Executing one innocent person is too high a price to pay,” she said.

However, several lawmakers argued for keeping the death penalty.

State Sen. Kirk Dillard, R-Hinsdale, said the law should be kept for the “worst of the worst” crimes.

“Those who murder law enforcement officials or prison guards or children, or the mass murderers, to me, need to have the death penalty in most, if not all, cases,” Dillard said.

Workers’ compensation

The state House and Senate waited until almost the last hour of the last day of the session to agree to legislation that created an entirely new system for handling workers’ compensation cases.

Under the new law:

  • The governor has the power to appoint new arbitrators, the state employees who hear workers’ compensation cases, for no more than three years.
  • Employers now can send injured workers to one doctor instead of two.
  • Doctor’s fees are slashed by 30 percent.
  • The number of weeks workers can collect compensation for certain injuries is reduced from 40 weeks to 28 weeks.

Quinn in June said, “There’s no better way to help people than with a J-O-B, (and) we’re going to be helping the employers of Illinois, the workers of Illinois, all of those who are committed to economic growth.”

Before the legislation entered the picture, Illinois ranked among the most expensive states for workers’ compensation, contributing to its “bad for business” reputation.

Education reform

Of all of the new laws passed in 2011, perhaps only the education reforms got President Barack Obama’s attention.

Illinois lawmakers and education advocates said the reforms, which passed in May, could become a national model.

Robin Steans, executive director for Advance Illinois, whose website bills the group as an independent voice to promote the public education system in Illinois, had said officials in Washington, D.C., were watching the Illinois reforms.

The reforms make it tougher for members of teachers’ unions to strike. Seventh-five percent of teachers would have to vote to go on a picket line.

The plan also would make it easier to fire teachers by streamlining the process. Supporters say the two-year process to fire a teacher would be condensed to three to four months.

But Ken Swanson, president of the Illinois Education Association, one of Illinois’ major teacher unions with 133,000 members, had said the real take-away from the reforms was that all sides — lawmakers, schools, unions and advocates — worked together.

“Look at what happens when everyone can come together at the table and talk,” said Swanson. “That’s something that colleagues in other states have not been given the opportunity to do.”

Business tax breaks

Even before lawmakers approved January’s tax increases, Republicans started talking about how the corporate tax hike would drive businesses out of the state.

By the summer, Democrats had joined that conversation.

By the fall, two of the state’s biggest companies, the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, and retail giant Sears Corp.,were telling lawmakers they may leave Illinois because of their high tax bills.

Lawmakers bickered through the two-week fall veto session and were forced to deal with CME and Sears’ issues during three “extra” session days in late November and December.

In the end, lawmakers agreed to split the tax relief for the companies from the tax relief for working families and small businesses.

The first measure would:

  • Increase Illinois’ Earned Income Tax Credit, or EITC, for low-income households from a maximum of $283 to $566, costing the state $55 million annually;
  • Raise the standard tax exemption for households from $2,000 to $2,050. This exemption would increase annually based on the rate of inflation. If inflation was flat, no increase would occur that year. The estimated cost is $20 million for the first year and would increase by about $20 million every year thereafter.

The second measure would:

  • Give the CME Group an annual tax break of $85 million and Sears Corp. $150 million in tax breaks over the next decade;
  • Extend research and development tax credits;
  • Reinstate the ability for businesses to claim tax breaks if their incomes don’t meet their expenses.

Quinn praised the EITC expansion as “one of the most important votes” all year. The governor did not focus as much on the tax breaks for CME and Sears.

Hutchinson said the Legislature’s job in 2012 is going to be making sure that Illinois doesn’t have to deal with another tax package like the one for Sears and CME.

“Until we’ve figured out a tax code that’s low enough so that companies don’t have to come in for industry-specific tax breaks, and … we broaden the base so that two-thirds of our companies are paying nothing, Illinois is always going to have a 1911 tax code for a 2011 economy,” Hutchinson said.

Originally reported by Illinois Statehouse News. Read the original article here.

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One Response to "Tax increase, impact, dominate Illinois Capitol in 2011"

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