State income tax headed back to 5 percent?

By Mark Fitton
Illinois News Network

SPRINGFIELD — Michael Madigan on Wednesday tossed out one possibility for new Illinois tax money, a bump in the income tax rate.

In fact, he said raising the personal income tax by 33 percent would a good spot to start talking.

Toward the end of his luncheon appearance before the City Club of Chicago, the speaker of the House caught a potential hand grenade of question: “How high do you think taxes need to go?”

Madigan, D-Chicago, smiled and started with, “Let me avoid creating a headline for tomorrow’s newspaper.”

After laughter from the audience, Madigan continued “…and say a good place to begin — a good place to begin — would be the level we were at before the income tax (increase) expired. Starting there, you can go whatever direction you want to go.”

The temporary income tax increase of 2011 ramped Illinois’ personal income tax rate to 5 percent and the corporate rate to 7 percent. Those increases rolled back to 3.75 and 5.25 percent, respectively, at the beginning of this calendar year.

Madigan’s answer wouldn’t appear to lock him into a set number, especially as he indicated there was room to talk, but it does comport with his frequent statements that more revenues, along with some cuts, will be needed to address the state’s financial problems.

Of course, “tax increase” remains a charged term in the Capitol, as many Illinoisans favor no increases at all, but instead advocate cuts well into the billions.

Republicans are holding to the position that they won’t support tax increases unless they get some of the main items from Rauner’s “turnaround agenda,” which they consider fundamental reforms to the state’s political and business environments.

“Taxpayers need to pay close attention,” Sen. Republican Leader Christine Radogno said of Madigan’s income tax remark Wednesday. “The powerful Democrat leadership is proposing a whopping 33 percent income tax increase — with no reforms to change the way we do business in Illinois.”

She said, “The citizens of Illinois want structural reforms that will lead to a more competitive Illinois economy and middle-class economic growth, while protecting the taxpayers.”

The speaker’s remark about the income tax rate isn’t terribly surprising, said Kent Redfield, a political scientist and professor emeritus at University of Illinois, Springfield.

“The state is certainly going to need new revenue, although I don’t know whether it will come from income tax or somewhere else,” Redfield said.

The state’s in a bind, said Jim Nowlan, a political analyst and former GOP member of the House. Madigan and other lawmakers know the state has to not only pay what it now owes but also must someday resume covering the obligations it has been shoving to the side of late.

“I think higher education in particular has a concern that once they (lawmakers and the governor) agree to a tax increase, will that tax increase be sufficient to fund future budgets but not pay them what they’ve funded on their own this year?” Nowlan said.

Higher education has taken a hit so far in fiscal year 2016, he noted, with universities in some cases fronting tuition for thousands of students who’d been relying on state-funded grants from the Monetary Assistance Program.

Madigan’s office on Wednesday evening issued a statement saying he wasn’t advocating a specific tax increase but still believes in a combination of new revenues and spending cuts.

“We have no plans to advance legislation to change the income tax rate, and I am committed to working with the governor to develop a budget that provides for a balanced approach to solving our budget deficit,” the speaker said in that news release.

The governor has said he wants to avoid raising taxes but might be able to live with some increases, perhaps temporary, if they come with what he considers reforms.

“Compromise will be the key,” he said last week during the public portion of meeting with the legislative leaders.

Illinois is in the sixth month of fiscal year 2016 without a budget. Meanwhile, the state is spending at pace that could put it roughly $5 billion into the red as it funds primary and secondary education, satisfies its debt service and pays for items specified by courts and in continuing appropriations.

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