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Another temporary tax hike?
Friday, Mar 3, 2017 - Posted by Rich Miller * As subscribers know, they didn’t just “consider” this idea, the Senate President agreed to put it into the grand bargain package as a concession to the GOP…
You’ll recall that the governor campaigned on the idea of raising the income tax a bit (he never really said by how much) and then rolling it all the way back to 3 percent by the end of his first term. Those 2014 hopes of his are now completely dashed, but this shows you how far Cullerton was prepared to go this week. After all, the temporary nature of the 2011 income tax hike is what put Illinois into this current disaster. Do we really want to go through that again in five years? The Republicans counter that Gov. Quinn’s biggest mistake was that he didn’t reduce spending by enough to deal with the rollback from 5 to 3.75 percent on January 1, 2015. They’re absolutely right about that. The Democrats did cut some spending, but not nearly enough. They just figured they’d either win again or that the newbie Rauner would be a pushover. Oops.
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- Ratso Rizzo - Friday, Mar 3, 17 @ 9:43 am:
I don’t understand why they would put themselves under the gun again in a few years when the tax rolls back. Haven’t they learned their lesson yet? Make it permanent—if all goes well, we pay our bills in a timely fashion, we’re on top of our pension payments, and we finally get in the black…then roll it back. I don’t that would be a hard vote to roll the tax back when the time comes. I couldn’t count how many people I know that don’t even know what our current tax income tax rate is—and many are state employees!
- Not Rich - Friday, Mar 3, 17 @ 9:44 am:
man..this truly was a bad grand bargain..
- Boat captain - Friday, Mar 3, 17 @ 9:51 am:
Foolish idea. This is part of what got us here in the first place.
- Arrggh! - Friday, Mar 3, 17 @ 9:52 am:
The last “temporary” tax hike was sold to the public as a method of paying down outstanding bills and debts. The legislature failed to curb spending, so it was an epic fail. So now we are supposed to entrust more money to the same legislators who failed before because this time they promise to do better?
- Langhorne - Friday, Mar 3, 17 @ 9:53 am:
Thats a big give for sen dems. No permanent tax increase unless prop tax freeze is permanent? Fine. Call rauners bluff, make both temporary, put the votes on, declare victory, and move on.
Unless you dont want a deal/s. Repubs gotta end this.
- Lucky Pierre - Friday, Mar 3, 17 @ 9:54 am:
Trading a permanent income tax increase for a two year property tax freeze is the hold up.
As discussed previously the property tax freeze can be overridden by referendum
- Langhorne - Friday, Mar 3, 17 @ 9:54 am:
PS–its not great policy, its a way out.
- Lucky Pierre - Friday, Mar 3, 17 @ 9:55 am:
Making both permanent is a much better solution
- Juice - Friday, Mar 3, 17 @ 9:58 am:
Lucky, where in the turnaround agenda was a permanent property tax freeze?
The first time it was ever brought up was when the Governor declared that he would only do another stop gap in exchange for a permanent property tax freeze. It was meant to make it clear he would not accept another half-measure from the Speaker.
The property tax freeze was always intended to be temporary in exchange for a full year honest to god grand bargain budget.
But now that’s no longer the case.
This is him moving the goal posts.
This is why he can’t get a deal.
This is why nobody trusts him.
- Chicago_Downstater - Friday, Mar 3, 17 @ 10:01 am:
I know it’s terrible policy, but if you tie the temp property tax freeze to the temp income tax increase, then you have a solid bargaining chip for when it comes back around. Just make sure both the freeze & the increase come up for renewal at the same time.
It’s not ideal, but none of this is ideal and something has to be done.
- siriusly - Friday, Mar 3, 17 @ 10:07 am:
Rauner has become Madigan. he’s got Cullerton negotiating against his own interests
The permanent property tax freeze is probably the worst idea ever, it’s a great bullet point that makes no sense. Local governments are about local control. Unless you’re going to fund them governor - you have to let them budget.
- Anonymous - Friday, Mar 3, 17 @ 10:11 am:
What has Rauner done to manage expenses with reduced revenue? He said the temporary tax hike should end; how has he cut spending to match that? I’m serious; I know he’s cut funding for universities and social services but is that enough? What else has he done, and what else is required?
- Oswego Willy - Friday, Mar 3, 17 @ 10:13 am:
To the Post,
Too little, too late?
I felt that the Governor had a huge win abc leverage point later in budgets if he (Rauner) would’ve done the following.
Agree to FY2015 having that “current” tax rate.
Then for FY2016, have the rate “cut the difference” between the raised rate and the original rate before the temporary tax cane into effect. For FY2017, have the remaining rate be lowered to the rate before the temporary tax was implemented.
It would have allowed Rauner to run again as a “tax cutter”
It would allow leverage to fund things while revenue keeps reducing and allow leverage for other wants.
Finally, it would have given enough breathing room for Rauner to work with Social Service groups to place the heat on Dems to fight for the reduced monies, and not be hostages of the moment for Rauner.
Rauner pleaded for that tax to expire. It was either heartless or ignorant… or both… to the governing needed, and the politics needed to get the governing.
Now we know, it was heartless.
- RNUG - Friday, Mar 3, 17 @ 10:13 am:
The State spends more than it collects in taxes and federal matching funds. Quinn did quite a bit of cutting, but it wasn’t enough to offset the income tax drop. The feds, if they can, will be cutting spending, not increasing it. Plus Rauner dug the hole we have to get out of deeper.
Illinois needs a tax increase if they are to ever get their fiscal house in order. Period. It should be long enough to fix things. Based on the results of the last one and the added debt, I’m guessing we need at least 10 years and it may take 20 years if they don’t keep a tight rein on spending.
The only way I would propose a temporary increase would be as part of a package that included a constitutional amendment to be voted on in 2018. It would be a Hobson’s Choice just like the proposed pension bill: either (a) a graduated income nax or (b) keeping the higher income tax until the bill backlog is current (60 days or less with no bills being held at the agencies) and the pensions are fully (pick your percentage from 75% to 100%) funded.
Anything else is short sighted and will just get us back where we are right now.
- wordslinger - Friday, Mar 3, 17 @ 10:14 am:
Everything passed by a legislature is temporary. Future legislatures can change any statute on the books.
- Rich Miller - Friday, Mar 3, 17 @ 10:15 am:
===as a method of paying down outstanding bills and debts===
#FakeNews
But it actually did accomplish that.
- Illinoised - Friday, Mar 3, 17 @ 10:17 am:
That is a cowardly “solution.”
- Arsenal - Friday, Mar 3, 17 @ 10:25 am:
==I felt that the Governor had a huge win abc leverage point later in budgets if he (Rauner) would’ve done the following.==
To that end, I’ve always felt that if Rauner had ever proposed an actually balanced budget, he would’ve gotten it passed with Democrats happy to let him own all the choices it took to get there.
But he never did, never even wanted to try until he got the Turnaround Agenda.
- Oswego Willy - Friday, Mar 3, 17 @ 10:30 am:
===To that end, I’ve always felt that if Rauner had ever proposed an actually balanced budget, he would’ve gotten it passed with Democrats happy to let him own all the choices===
- Arsenal -
Lots of truth there, and I mean lots. The issue has always been to get Rauner to do “something” and if agreeing to a staggered sun setting leading to a budget, I would have applauded that too.
Since neither happened it seems that the goal was that nothing works happen and that’s part of the shame of a Governor being passive for an Agenda that has/d no chance for 60 and 30 as the precondition to a budget.
That’s where the heartlessness begins.
With respect, good point - Arsenal -
- Norseman - Friday, Mar 3, 17 @ 10:31 am:
After all this turmoil, I would not vote for a temporary tax increase. There needs to be some stability in funding. The rating agencies will not respond favorably without it.
- Oswego Willy - Friday, Mar 3, 17 @ 10:31 am:
“nothing would happen”
- Piece of Work - Friday, Mar 3, 17 @ 10:32 am:
Just remember the other side of the ledger—-Billions and billions taken from the pockets of people that will not drive the economy.
- Grandson of Man - Friday, Mar 3, 17 @ 10:33 am:
“make both temporary, put the votes on, declare victory, and move on”
Sadly I agree with this. We need to stop or substantially slow down the damage. We couldn’t do it right with an all Democratic government, and it’s worse now with this governor.
- walker - Friday, Mar 3, 17 @ 10:34 am:
“”as a concession to GOP”"
Same as 2010, though a lot of Dems were also relieved when Quinn caved to pressure and called it temporary.
Every constituent hates tax increases. Do legislators think the “temporary” label provides much cover? Just do the right thing in an ugly situation, and take your lumps. Kinda like holding contentious town hall meetings.
- A Jack - Friday, Mar 3, 17 @ 10:38 am:
Perhaps temporary but tied to the pension ramp with a stipulation that if new pension fund borrowing is required then the income tax will go up further.
- Lucky Pierre - Friday, Mar 3, 17 @ 10:48 am:
Arsenal the GA did not even bring up Rauner’s budget for debate or allow him the authority to reduce spending. So you think he should just raise taxes all by himself even though the legislature will not cut spending?
They were not happy to make him own anything
- City Zen - Friday, Mar 3, 17 @ 10:51 am:
Totally agree with OW. Even as someone who was adamant about the 5% hike expiring as promised, I would’ve been fine with a 4.5>4.25>3.75% plan just to give Rauner breathing room to reign in spending. Opportunity lost.
- Oswego Willy - Friday, Mar 3, 17 @ 10:52 am:
- Lucky Pierre -
While a tax increase and cuts are going to be required, Rauner has proposed 3 phony, grossly unbalanced budgets, status quo in their existence.
Had Rauner proposed a staggering sun setting with his first budget balanced off of the tax staying for an additional year, you’d have an argument.
You don’t.
- Lucky Pierre - Friday, Mar 3, 17 @ 10:55 am:
The House and Senate also passed 3 phony, grossly unbalanced budgets status quo in their existence.
You don’t blame them apparently, typical hypocrisy on your part
- Oswego Willy - Friday, Mar 3, 17 @ 10:59 am:
===The House and Senate also passed 3 phony, grossly unbalanced budgets status quo in their existence===
So you admit that Rauner as proposed 3 phony, grossly unbalanced budgets status quo in their existence.
Rauner ran against the Status Quo. Now Rauner is absolved for BEING the Status Quo.
That doesn’t work. You can’t say “they do it too!” if you run saying “they need to stop it, I’m against it”
Capiche?
- Anonymous - Friday, Mar 3, 17 @ 11:00 am:
Math always wins. If you can’t balance the budget through cost cutting alone (and you can’t), then you need to do so by increasing revenue. An increase in long-term revenues through growth in the economy is feasible, but it doesn’t address the short-term issue - which is critical. Approve a tax increase now.
- Oswego Willy - Friday, Mar 3, 17 @ 11:04 am:
If you want to make the argument that Revenue is NOT required, I’d like to see that person take the IPI proposal, with those cuts, and get 60 and 30 and after ALL that 60 and 30, have Governor Rauner sign it, as is, and run with that budget as “his” and those cuts as “his” too.
Make that case for me. Make me see 60 and 30 and a Rauner signature for the IPI budget.
- Lucky Pierre - Friday, Mar 3, 17 @ 11:05 am:
Yes but they will need willing partners for compromise.
Rauners budget is clearly not status quo with all the Turnaround agenda items in there
Senator Harmon mentioned that they put some of the Turnaround items in the grand compromise for the good of the state and that many of his colleagues would vote against them if they were individual bills
Voting against the bills even though they are good for the state
Pretty much sums up the legislature
- Oswego Willy - Friday, Mar 3, 17 @ 11:13 am:
===Rauners budget is clearly not status quo with all the Turnaround agenda items in there===
No. Sorry. No.
Rauner complained the “career politicians” world spend more that they had.
Rauner, 3 times, proposed just that.
===Senator Harmon mentioned that they put some of the Turnaround items in the grand compromise for the good of the state and that many of his colleagues would vote against them if they were individual bills
Voting against the bills even though they are good for the state
Pretty much sums up the legislature===
“Senator Harmon mentioned that they put some of the Turnaround items in the grand compromise for the good of the state and that many of his Republican colleagues would vote against them if they were individual bills
Voting against the bills even though they are good for the state
Pretty much sums up Rauner sabotaging the Grand Compromise”
Better.
- Sue - Friday, Mar 3, 17 @ 11:13 am:
How about a filing fee to run for governor at 100 million each.
- downstate commissioner - Friday, Mar 3, 17 @ 11:15 am:
Siriusly @10:07 said it best. “The permanent property tax freeze is probably the worst idea ever, it’s a great bullet point that makes no sense. Local governments are about local control. Unless you’re going to fund them governor - you have to let them budget.”
This is the biggest problem with the proposed budget compromise that I see. A better solution would be to mandate PTELL on all counties, even though I cuss it every year; it at least allows some room for increase (% rate increases of less than 2% for the past several years) or some fund juggling to move the income to where it is needed most.
Local Governments costs climb, like everybody else’s; employees need raises, the price of materials and supplies rise, etc.
Townships and cities get little (if any) money from the income tax. Mandating a permanent property tax freeze is just unconscionable and a disservice to all citizens.
And just blowing it off by saying that “property taxes can be increased by referendum” completely ignores the problems and expense to get referendums on the ballot, never mind the “anti-tax” mood of voters now.
- GA Watcher - Friday, Mar 3, 17 @ 11:21 am:
The permanent solution to end the overreliance on the property tax in Illinois is not a freeze. That’s just a politically popular band aid. The more permanent fix is for the State to reform the school aid formula and, as part of that, assume its constitutional responsibility to provide the “preponderant share” of funding for elementary and secondary education. It could then do a swap whereby local property taxes are reduced dollar for dollar by a new source or sources of State funding. If that’s done, the current consternation re high property taxes go away seeing how schools make up nearly 70 percent of the average property tax bill.
- Oswego Willy - Friday, Mar 3, 17 @ 11:22 am:
===Rauners budget is clearly not status quo with all the Turnaround agenda items in there===
Rauner’s budget proposed for this upcoming fiscal year is between $4-7 billion out of whack. It’s not up for discussion or debate. The governor’s own people agree.
That’s status quo.
No amount of 1.4% or $500+ million was going to balance any of the 3 Rauner proposed budgets.
I go back only for reference to what is bad and how bad…
… had Rauner agreed to the staggered sun setting, the amount if room to try to justify 1.4% and $500+ million might have “been enough” in Year One…
Now with $12+ billion in unpaid bills, deficits, no mechanism to budgetarily pay and the courts dictating where the constitution doesn’t explicitly say…
Revenue, additional revenues, is required. It’s not a give.
Temporary? Tough to say no, tough to argue it shouldn’t be permenant too.
- Ginhouse Tommy - Friday, Mar 3, 17 @ 11:40 am:
The tax on businesses in the state are too much. I talked to a guy who works for a construction firm that does specialized concrete work. He said that the company was considering moving to Iowa because in his words “Man, the taxes are killing us.” This guy wasn’t a suit, he was a laborer. If taxes are raised it can’t be on businesses because we can’t afford to lose anymore to other states. I’m not trying to pass judgement but there’s something screwy about how this state applies taxes to small businesses. I don’t know what the solution is. That needed to be said.
- east central - Friday, Mar 3, 17 @ 11:40 am:
There should be three components: a temporary increase to cover the long-term pension debt, a temporary increase to deal with the backlog of bills built up over the past couple of years, and a permanent increase to bring revenue up to the level needed to balance the budget with the pension debt and bill backlogs factored out.
It might be worth considering bonds to deal with the long-term pension debt and/or the bill backlog.
Different taxes, such as service taxes, might be used for one or more components.
- Rod - Friday, Mar 3, 17 @ 11:44 am:
Senator Cullerton in even bringing up this sunset tax that was rejected by his own caucus shows how dead the grand bargain is. Senator Cullerton is a lost man right now.
- Piece of Work - Friday, Mar 3, 17 @ 11:48 am:
And east central, what would your proposed increase look like?
- Daniel Plainview - Friday, Mar 3, 17 @ 11:52 am:
Still waiting for the quote where Rauner said he’d temporarily raise the income tax. From his campaign website:
“We need to completely overhaul the tax code; not just tinker around the edges. To do that, we can:
•Get rid of the Quinn-Madigan 67% income tax hike.
•Get rid of the Quinn-Madigan 45% corporate tax hike.
•Ensure your property taxes never go up if the value of your home decreases.
•Overhaul the tax code so that it’s fair to all taxpayers.”
- Old and In the Way - Friday, Mar 3, 17 @ 12:42 pm:
Ginhouse Tommy
I admit that I don’t know any construction laborers but I have to question how many construction laborers are aware of the taxes the company they work for pays and what the financial status of the company is. Seems like BS to me, especially since overall taxes in Iowa are higher than Illinois. This is the kind of baseless crap that gets passed off as gospel and is actually just some low level employee blowing hot air! There are issues with Illinois taxes and small business to be sure but listen to an accountant not a construction laborer when it comes to business taxes and policy please!
- HangingOn - Friday, Mar 3, 17 @ 12:57 pm:
==He said that the company was considering moving to Iowa==
Really? Iowa’s corporate tax rate is 8% if gross income is over $25k. Goes up again at $100k. Plus, they’d be paying more in income tax as well.
- east central - Friday, Mar 3, 17 @ 12:59 pm:
Piece of Work,
Here is what I would consider as a basis in general terms.
I would cover the pension debt with bonds with a relatively long term. I would set the amount such that if pension “reform” holds and market returns are at the upper end of expectations, then the pension funds are at 100%. If no constitutional pension reform is possible and if returns are at the low end of expectations, then the amount would be set to target 75-80% funding. Taxes to cover this would be around for a while (20 years?).
I would cover the bill backlog with relatively short-term bonds. This could be covered with taxes that might be tolerated for a few years but not more. Might the sugar tax fall into this category?
For the general budget, the basis depends upon what is done with education funding, pension normal funding (moving to a split between the state and the districts/universities makes sense to me), and capital funding (it would be nice if this were a recurring line item in the annual budget).
- Harry - Friday, Mar 3, 17 @ 1:42 pm:
A permanent increase in State funding coupled with knee-capping the revenue structure for counties, municipalities and school districts, does not seem wise or appropriate–unless you couple it with a much more generous LGDF distribution, but then the State takes a hit.
Problem with all these ideas is they don’t grow the pie and no one at the political level wants to tell the whole ugly story because historically that is the way to lose the next election.
We get the government we vote for.
- formerpro - Friday, Mar 3, 17 @ 2:21 pm:
I no longer have a front-row seat to this very, very, very bad movie…..but I am certainly aware that it continues to play every day in Illinois with no end in site. Our leaders are so feckless I’m not sure there would be a balanced budget EVEN IF one party controlled the whole show! I hope I am wrong and a Democrat is elected Governor in 2018.
- formerpro - Friday, Mar 3, 17 @ 2:22 pm:
No end in sight……
- blue dog dem - Friday, Mar 3, 17 @ 2:24 pm:
RNUG. I always appreciate your well thought out comments. You have a way of disagreeing with comments without belittling. That is a wonderful trait to posses.
Your post at 10:13, last sentemce in par a 2, says it all. “If they keep a tight reign on spending.” My reason for opposing any significant tax increase is based on that and that alone. As soon as a politician, whatever party, needs to buy off a voting bloc, you know full well what happens. It will never change.
- Piece of Work - Friday, Mar 3, 17 @ 2:31 pm:
East central, what would you suggest as the state income tax rate? For how long?
- Anonymous - Friday, Mar 3, 17 @ 3:17 pm:
Between income and property taxes, is this what Republicans want for Illinois? http://www.wpr.org/small-wisconsin-towns-paved-roads-return-gravel
- Free Set of Steak Knives - Friday, Mar 3, 17 @ 3:28 pm:
If the goal is to promote economic opportunity and job creation, a temporary tax hike is the wrong approach.
Bond rating agencies and business analysts can do the math. They understand that if the income tax hike is expiring in four years, it has to be replaced by some other revenue. They are much less likely to make big investments when the tax structure four years from now is a complete unknown.
And who wants to send their kid off to a state university knowing they might implode again in two years?
- Lucky Pierre - Friday, Mar 3, 17 @ 3:33 pm:
What is wrong with trusting voters to unfreeze property tax through referendum?
- blue dog dem - Friday, Mar 3, 17 @ 3:39 pm:
Lucky, you know full well we is dummies.
- Last Bull Moose - Friday, Mar 3, 17 @ 3:40 pm:
Few of the people who want to cut spending understand how little discretionary spending is in the State budget. And much that looks discretionary comes with Federal matching funds and rules. It is hard for the State to refuse a program with a high Federal match.
Prison population reduction is a target in part because there is almost no Federal match there.