* I’d been wondering whether this $325 property tax rebate check funded by the proposed state income tax hike was a sham. For those with high property tax bills, it could very well be because the idea on the table would also eliminate the state’s current property tax exemption on the personal income tax…
“Anybody with property tax bills over $6,500 loses completely because they would have had a bigger exemption on their income taxes then what they are going to get back from the state,” said [Rep. Ed Sullivan], who also is the assessor in Fremont Township.
Rep. Fred Crespo, a Hoffman Estates Democrat who has said he would not approve an income tax increase without property tax relief, said Friday the idea of a $325 check is a “big, big joke.”
“That doesn’t even amount to anything,” Crespo said. “It’s almost an insult.”
$6,500 is probably on the high side for middle class Cook County residents, but it ain’t everywhere else. My annual property taxes are almost twice that much (and despite what people think, I’m nowhere near wealthy). If Eddie’s right, this is indeed a crock. It’s actually a property tax increase for some, along with a brand new income tax hike. Nicely done, fellas.
Plus, this idea of permanently raising income taxes by a quarter point to fund a $325 check to property taxpayers is, in part, a direct wealth transfer from renters’ income taxes to property owners’ pockets. Where’s the decency in that?
You really gotta question whether the leaders (or Speaker Madigan, at least) just put this gigantic tax hike mess out there to let the media and angry constituents kill it before members come back to town. Subscribers already know several other reasons to be suspicious of this thing. We’ll have to wait and see what happens, but this proposal looks worse every time a new rock is kicked over.
Give us real property tax reform. We aren’t convinced that the “property tax reform” embedded in this package is worth much. One quarter of one percent of the 2.25 percent income tax increase, or about $775 million annually, would be used to give most Illinois homeowners a permanent rebate of about $325 on their property taxes. A tax increase to give homeowners a small rebate? Doesn’t sound worth the effort.
* Whew! What a week! I’ll be back Sunday afternoon because the House is coming back to town.
Also, I’m still working on that Inauguration event list which I promised subscribers. I’m going to keep at it this afternoon and evening until I finish. Check back a bit later.
* As you’re probably aware by now, the House has left town without acting on the proposed tax hike…
“The votes aren’t here in the House yet,” said Rep. Frank Mautino, D-Spring Valley, a House budget expert. “There’s not 60 votes.”
House Speaker Michael Madigan has not commented on the proposal yet, but was expected to meet with Gov. Pat Quinn behind closed doors today to fine-tune the plan.
The governor also has been asking individual lawmakers into his office to lobby them for support. […]
Rep. Susana Mendoza, D-Chicago, said she doesn’t support the plan as it stands because it would not provide any additional money for cities, even though the state has recently forced local municipalities to pay more into their pension retirement systems. Mendoza is running for Chicago city clerk in the Feb. 22 election.
* Meanwhile, the Taxpayers Federation of Illinois sent over this handy little chart. Click the pic for a larger image…
Note that corporate tax rate. Pretty much all the media coverage has claimed the rate would rise to 8.4 percent. Not true. Corporations also pay a Personal Property Replacement Tax of 2.5 percent of income. That means the total corporate rate will rise to 10.9 percent. More from the Taxpayers Federation…
# 1. Includes both regular and personal property replacement tax rate. Taxpayers’ only compare total rates. It is not important to them that the state split the proceeds.
# 2. Both Iowa and Missouri, unlike most states allow a deduction for federal income taxes paid therefore the effective rates are about 20% lower than the stated rate.
Under the plan, Illinois’s one-rate individual income tax will rise from 3% to 5.25%, a 75 percent increase. The corporate income tax will rise from 7.3%[3] to 10.9%, a 49 percent increase and becoming the highest state corporate income tax in the United States and the highest combined national-local corporate income tax in the industrialized world. [Emphasis added]
* Gov. Pat Quinn was pinned down by reporters last year on taxes and some folks still remember…
The [income tax hike] proposal puts Quinn in an awkward position. It would boost the tax rate by 2.25 percentage points, but the governor - while running for re-election - promised last year to veto any increase above 1 percentage point.
Last summer, a Quinn aide suggested taxes might have to be raised by 2 points. Quinn quickly disavowed the comments and said he opposed anything beyond his proposed hike of 1 percentage point.
“I’m going to veto anything that isn’t my plan,” Quinn said at the time.
Quinn’s office didn’t comment Thursday on the conflict between the tax plan and his campaign promise.
It wasn’t completely clear that he’d veto anything above 1 point, but it was pretty darned close…
* The Question: How would you advise Gov. Quinn to deal with this campaign promise?
* As you know by now, the House passed a death penalty abolition bill on the second try yesterday. Democratic state Rep. Pat Verschoore voted against the bill the first time, then changed his vote after the bill’s sponsor appealed to him…
“I’d been back and forth on this since they started talking about abolishing it,” Verschoore said. State Rep. Karen Yarbrough, D-Maywood, the proposal’s sponsor, asked him to reconsider his vote, he said.
“She’s helped me on some legislation I’ve had through the years, and so I said I’d give her the vote,” Verschoore said.
“I was on both sides of this issue. But then you think of the potential cost savings of this bill, and the state needs all of the savings we can get,” Verschoore said. “Besides, my wife was on me to vote for it.”
You just never know what’ll move a member sometimes. But a spouse with strong views on an issue can be a powerful force.
During the second vote, several lawmakers either switched positions or failed to vote. But in the end, supporters collected the 60 votes they needed to pass the House. Fifty-four House members voted against it.
But two retiring lawmakers, Republican Bob Biggins of Elmhurst and Democrat Mike Smith of Canton, changed their votes from no to yes, while Rep. Anthony DeLuca, D-Crete, switched from yes to not voting.
“I don’t think I was the convincing factor by any means,” said Sen. Kwame Raoul, D-Chicago, the Senate sponsor of the bill, who talked to both Biggins and Smith between votes. “I’d love to take credit and say I have these great persuasive abilities, but I don’t think that’s the case. A lot of people were conflicted, even people who voted no on the bill. It was a very difficult bill. It’s not an easy issue.’
Republican Rep. Jim Sacia, a former FBI agent from Pecatonica, said threatening defendants with the death penalty often can make them talk to authorities to help solve crimes.
“Don’t take that tool from law enforcement,” Sacia said.
Others said they supported the idea of the death penalty, but couldn’t in good faith allow for executions when it has been proved that Illinois’ system is broken.
“I could administer the death penalty myself to a cop killer or a serial murder and sleep like a baby at night if I knew without a doubt of their guilt,” said Rep. Susana Mendoza, D-Chicago, who is running for city clerk. “(But) we’ve come horrifyingly close to executing innocent men, and it could happen again.”
* The bill now moves to the Senate, where its sponsor is predicting an easier time of it. Senate President Cullerton also supports the bill…
Senate President John Cullerton said Thursday night he supports the proposal and hopes it passes. But the Chicago Democrat stopped short of saying he would ask his members to back it.
“That’s a real personal decision,” Cullerton said of voting on abolition. “People vote their conscience on something like that and I’ll let them decide how to do that.”
* Zorn dug up Gov Pat Quinn’s response to the Tribune’s questionnaire which shows he supports the death penalty…
I support capital punishment when applied carefully and fairly… Although the moratorium gives the state of Illinois time to review all aspects of capital punishment, and makes it possible to put effective safeguards in place, the death penalty underscores our shared belief as a society that some crimes deserve the most severe punishment, when handed down fairly and justly.
Quinn has refused to say what he’ll do if this bill lands on his desk.
Hopes for legalizing medicinal marijuana in Illinois were snuffed out Thursday.
Senate Bill 1381 failed in the Illinois House by a vote of 56 yes, 60 no. The legislation would have given patients with chronic conditions, such as cancer, glaucoma or multiple sclerosis, the right to possess up to two ounces of marijuana for their own use.
The bill’s sponsor, Rep. Lou Lang, D-Skokie, had previously said he had enough votes to pass the bill, if all his supporters showed up.
The sponsor of the bill, Rep. Lou Lang, D-Skokie, pledged to continue pushing toward legalizing the illicit herb. “I am going to continue to press on — on this particular piece of legislation, or some version of it — until I pass it,” Lang said. “Next year, the year after … I’m a young man. I’ll be here awhile.”
* Related…
* Illinois House reverses decision, votes to abolish death penalty
* On 2nd try, state House votes to abolish death penalty
* Ill. Death penalty repeal fails — then passes — in House
* Leitch, Umholtz disappointed by death penalty vote
* I told subscribers about this bill after it passed the House Wednesday. It was approved by the Senate yesterday and has received zero media coverage outside of myself and the Champaign News-Gazette. Here is the paper’s story…
A budget reform process that proponents say will help bring fiscal discipline to Illinois cleared the House Wednesday, 85-26.
It would generally limit spending to revenue projections, require the governor to set annual budget priorities and would require regular review of state grants awards, beginning in 2012.
The most controversial portion of the measure – one that brought out a flood of opponents from organized labor – would keep governors from imposing new labor agreements on their successors.
“We don’t want the current administration, basically, to tie the hands of a future administration,” said Rep. Carol Sente, D-Vernon Hills, the sponsor of the bill.
She admitted the bill was a reaction to a labor agreement Gov. Pat Quinn signed last summer, just before the gubernatorial election.
Sente said the goal of the grant review was to determine “what are we funding and are we meeting the goal of that grant program. We’re not trying to pick on any one item. We’re just trying to get the budget back in shape.”
The union contract provision was fascinating to me. From the bill’s synopsis…
Provides that no collective bargaining agreement entered into on or after the effective date of the amendatory Act between an executive branch constitutional officer or any agency or department of an executive branch constitutional officer and a labor organization may extend beyond June 30th of the year in which the terms of office of executive branch constitutional officers begin.
Provides that no collective bargaining agreement entered into on or after the effective date of the amendatory Act between an executive branch constitutional officer or any agency or department of an executive branch constitutional officer and a labor organization may provide for an increase in salary, wages, or benefits starting on or after the first day of the terms of office of executive branch constitutional officers and ending June 30th of that same year.
Provides that any collective bargaining agreement in violation of these provisions is terminated and rendered null and void by operation of law.
Remember Gov. Pat Quinn’s much-criticized no-layoff deal with AFSCME last fall? That got a ton of media attention, but a reform which addressed the issue and passed both chambers has failed to receive any ink at all from the big boys. Strange.
And that grant review mentioned above is actually tougher than reported. Lots and lots of state grants could be terminated next year. From the synopsis…
Amends the Illinois Grant Funds Recovery Act. Provides that: any grant funds and any grant program administered by a grantor agency subject to the Act are indefinitely suspended on July 1, 2012, and on July 1st of every 5th year thereafter, unless the General Assembly, acting by Joint Resolution, authorizes that grantor agency to make grants or lifts the suspension of the authorization of that grantor agency to make grants;
in the case of a suspension of the authorization of a grantor agency to make grants, the authority of that grantor agency to make grants is suspended until the suspension is explicitly lifted by Joint Resolution by the General Assembly, even if an appropriation has been made for the explicit purpose of such grants; and the suspension of grant making authority supersedes any other law or rule to the contrary.
Now, some large Internet retailers such as Amazon.com and Overstock.com don’t collect Illinois sales taxes because they don’t have a physical Illinois presence.
Shoppers technically still owe the taxes, but the vast majority don’t pay because they’re unaware.
The legislation would force Amazon to collect the taxes because they have certain kinds of contracts with Illinois companies. It was approved by a 88-29 vote.
Illinois tax collectors may want to hold off on expecting a large influx of cash immediately, though. In other states that have tried the same move, the laws have been tied up in the courts.
Companies like Amazon allow third-party vendors to sell through its Web site. If Amazon stopped dealing with Illinois businesses to avoid the law, the multi-billion-dollar company wouldn’t be legally bound to pay the tax. That prospect concerns Rep. Dave Winters, R-Shirland.
“A company in my district has a relationship with Amazon. If they move three miles north to Wisconsin, they’re not subject to Illinois law anymore. They could then say ‘you know what, this tax is a great tax but we’re not paying it. We moved out of state, and we’re moving all those jobs with us,’” Winters said.
Having online retailers charge the same tax that brick-and-mortar stores doing business in the state is a matter of fairness, according to Osterman. He said business owners in the state support the measure.
“The business community is squarely behind this. They want to make sure that Illinois businesses are treated fairly and that they are not put at a competitive disadvantage,” Osterman said.
* The bill now heads to the governor’s desk, but Amazon responded quickly yesterday, blasting out an e-mail to Illinois members of its “associates program,” which was forwarded to me last night by several readers…
Greetings from the Amazon Associates Program: We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois…
Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.
The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor’s staff.
Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states’ residents.
Governor Quinn’s office may be reached here.
We thank you for being part of the Amazon Associates Program, and wish you continued success in the future.
Some Illinois-based Web businesses were furious Thursday at a legislative plan that would require online retailers, such as Amazon.com and Overstock.com, to collect a 6.25 percent state tax if they have commissioned affiliates in the state.
That puts at risk huge revenue streams for such Illinois-based Web sites as FatWallet.com, CouponCabin.com and BradsDeals.com, which receive much of their commissions from sending customers to major online retailers. Their commissions are at risk because large retailers have shown in the past that they will sever business relationships with affiliates like those to avoid collecting state sales tax, called a use tax in Illinois, on products they sell. […]
“I feel like I’ve been completely flipped the bird,” said Tim Storm, chief executive of FatWallet, based in Rockton, near Rockford. “Essentially, 30 to 40 percent of our revenue gets shut off instantaneously.”
FatWallet officials were busy Thursday scouting ways to leave Illinois, Storm said.
One week. That’s the most supporters of a clean coal plant that is supposed to be built in Taylorville are willing to give state lawmakers.
Illinois senators voted late Wednesday against state support for what is being billed as a multi-billion dollar, state-of-the-art clean coal power plant and research site. Tenaska Inc. is not asking Illinois lawmakers to pay for the $3.5 billion plant. Instead, the company wants a state guarantee that the electricity generated there will have a market.
Bill Braudt, general manager of business development for Tenaska Inc., said, right now, the company can only sign a three year contract for power. But he insists that no one is willing to finance a multi-billion dollar project based solely on a three year guarantee.
Tenaska has been asking for state help for more than four years, and Braudt said this is the company’s last go-round in Springfield.
“We’ve spent five years trying to develop this project, and $40 million of our own money,” he said. “And if it doesn’t pass this time there is not much confidence that we have that it will be passed later.”
You’ve no doubt seen the arguments on both sides by reading the ads posted here. There are good arguments both for and against this plant, but if we want to stop using old, dirty coal technology then we’ve got to realize that it’s gonna cost more money. There is no magic solution.
* Related…
* Casinos might take a pass on expanding: Under the gambling expansion legislation being considered by lawmakers, existing casinos each would be allowed to add 800 new spots to gamble. But with revenues from their current offerings already dropping and the rights to those spots costing big bucks, existing casinos might take a pass on expanding, an industry representative said Thursday.
* Plants that would turn coal to gas could cost consumers - Illinois bills would force state utilities to purchase synthetic gas from two companies proposing to build plants that produce gas from coal, one downstate and the other on the Southeast Side of Chicago.
* Legislature approves watchdog over transit agencies - State ethics officer could check for fraud, waste
Gov. Quinn struck a deal with the Legislature’s ruling Democrats Thursday to raise the state income tax by 75 percent and boost the tax on cigarettes by $1 a pack…
The cornerstone of a dramatic day, the revenue agreement reached by Quinn, House Speaker Michael Madigan (D-Chicago) and Senate President John Cullerton (D-Chicago) would impose a temporary, four-year increase in the state tax on workers’ paychecks from 3 percent to 5 ¼-percent.
The money from that, the cigarette tax hike and a corresponding increase in the corporate income tax from 4.8 percent to 8.4 percent would erase the state’s expected $15 billion deficit.
It also would generate a $700 million-plus windfall for schools and fund annual $325 rebate checks to property owners beginning in 2011, two key concessions fought for by leading black lawmakers, including Rep. William Davis (D-Homewood).
The proposal would also limit state expenditures for the next three fiscal years to one percent a year, according to Cullerton.
The personal income-tax hike is expected to net the state roughly $6.2 billion, and a corresponding corporate income tax increase could raise an additional $1 billion, Cullerton said. The rate businesses pay would temporarily jump from 4.8 percent to 8.4 percent [plus the currently imposed 2.5 percent replacement tax, for an effective tax rate of 10.9 percent]. […]
As a measure of how desperate state government’s finances are, Cullerton said the state would use the income-tax hike to borrow $12.2 billion. Of that, $8.5 billion would pay overdue bills and $3.7 billion would cover a government worker pension payment lawmakers skipped when putting together the current budget, he said. […]
With Illinois’ financial problems escalating each budget year, the state is facing prospects of a $15 billion budget deficit and more than $8 billion in overdue bills to providers of social services, primarily to the poor. At the same time, its massively underfunded public employee pension system faces the prospect of selling off assets to help cover retirement payments.
Local governments normally get a cut of the state income tax, but they would not share in revenue from the tax increase. Cullerton said they would not lose any of the portion they now receive. […]
If approved, this is the final year that property owners will use the property tax deduction currently on their state income tax return. Instead, in the future each property owner would receive a check from the state for $325.
“About 80 percent of the people who pay property taxes would get a greater break,” Cullerton said.
The income tax increase would be based on 2011 incomes, back to Jan. 1, according to Cullerton. But he is quick to say that homeowners will get a property tax credit this year, and property tax rebate checks of $325 starting in 2012.
Cullerton said the tax increase and borrowing plan of 2011 should settle Illinois’ budgets until at least 2014.
“Eight-billion-dollars will go back into the economy; people will be paid on time,” he said. “Our credit rating will be dramatically improved. We will then have a balanced budget with virtually no growth for the next four years.”
Madigan’s spokesman said he couldn’t discuss the speaker’s position. The Senate has approved tax increases in the past, so the biggest question about the proposal is whether Madigan can find enough votes to get it through the House.
The governor’s office put out a statement that stopped short of saying the three leaders had reached a final agreement. Rank-and-file legislators said Quinn described the tax plan to them earlier in the day and portrayed it as a deal among all three of the powerful Democrats. […]
Madigan has repeatedly said he doubts that a tax increase could pass in the House without Republican support. But Republican leaders have not been included in tax and budget negotiations, and there was no indication Thursday that they were prepared to cooperate with the Democrats.
State Sen. Dale Righter, R-Mattoon, characterized the push for a tax hike as a “last-minute, lame duck session money-grab by the Democrat leaders.”
“It’s taken us a decade to get into this problem. I don’t know why we think we need to solve it in two weeks like the Democrat leaders apparently intend to do,” Righter said.
* Fiscal year income tax revenues are up, by the way, but mainly because of the tax amnesty program…
Illinois has had only modest growth in tax revenue for the first half of fiscal year 2011, although a precise figure is hard to determine because of the tax amnesty program that ran from Oct. 1 to Nov. 8.
It appears, according to the Legislature’s Commission on Government Forecasting and Accountability, that real growth in the state’s “big three” revenue sources – the sales tax, individual income tax and corporate income tax – is about $240 million. But if the revenue from the tax amnesty program is included, that growth is about $679 million, an increase of about 7 percent over last year’s figures.
The results of the tax amnesty program are still being tabulated, but its proceeds are now up to $628 million, a sum that is greater than had been expected. Still, much of that money likely would eventually have been collected anyway, according to the commission.
* And at the bottom of the usual scare story about bond speculators, we have this…
John Miller, chief investment officer of Nuveen Asset Management, has been increasing Nuveen’s Illinois holdings as part of its national muni portfolio of nearly $80 billion, because he says default fears are overblown.
He says if the governor and lawmakers can agree this week on raising the state income tax for the first time in years, it would go a long way toward closing the $13 billion deficit. In that case, he said, spreads could tighten ”quickly.“
Quite right. All of those people betting against Illinois in the still relatively tiny CDS market are gonna lose big bucks if this tax hike and bond program passes.
Senate President John Cullerton held a media availability in his office to explain the deal reached among Democratic leaders. The deal includes a 2.25 percentage point increase to the state’s individual income tax rate.
