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* WTTW…
Under the Senate plan, which passed Tuesday on a partisan vote of 32-26, the [income] tax rate would nearly return to what it was: Illinois residents are looking at paying a rate of 4.95 percent on their income taxes. Corporations would see their taxes rise, too, with the rate edging from 5.25 percent to 7 percent.
Both hikes would be retroactive, going back to January.
Because the income tax hike is retroactive to Jan. 1, 2017, personal income taxpayers will pay an effective tax rate of 5.81 percent on their earnings for the remainder of the year.
The reason it’s backdated is because the grand bargain was originally designed in January to fix the hole in Fiscal Year 2017, the current fiscal year. So the plan all along has been to make it retroactive to January 1st.
That would’ve been no problem if the grand bargain had passed in January or February, but Gov. Rauner demanded the Senate fix the Fiscal Year 2018 hole as well and then punted the problem to the chamber during his February budget address. And when Rauner derailed the package on March 1st it took almost two more months to patch something together, and by then it was a partisan plan.
So, more delays will mean an even higher effective tax rate for the rest of this calendar year unless they simply write off FY 17 like they already have with FY 16.
posted by Rich Miller
Wednesday, May 24, 17 @ 1:27 pm
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And if they don’t act now, it’s going to be far higher than that the next time they do.
Comment by Chicago Cynic Wednesday, May 24, 17 @ 1:32 pm
Here it comes…3….2…1….”the Democrats want to raise your taxes 55%!”
Comment by 95th Resident Wednesday, May 24, 17 @ 1:32 pm
== unless they simply write off FY 17 like they already have with FY 16. ==
With $14B in backlogged bills, you can’t easily write of FY17.
Comment by RNUG Wednesday, May 24, 17 @ 1:32 pm
=== unless they simply write off FY 17 like they already have with FY 16 ===
Radogno was right when she said the end of February was the deadline for getting a bipartisan deal passed that the Governor could sign.
Comment by Free Set of Steak Knives Wednesday, May 24, 17 @ 1:32 pm
=== With $14B in backlogged bills, you can’t easily write of FY17. ===
You can bond out $10B to pay off the debt, just as we did with pension obligations.
Comment by Free Set of Steak Knives Wednesday, May 24, 17 @ 1:34 pm
If it’s 5.81 for the rest of the year and 4.95 after that, then it follows that everyone who voted for it supported a tax cut starting 1/1/18, and everyone against it opposed the same cut.
(Snark, kinda, although I’ve seen mail based on much less.)
Comment by Reality Check Wednesday, May 24, 17 @ 1:36 pm
==You can bond out $10B to pay off the debt, just as we did with pension obligations.==
I think the strategy is: let’s wait until the state has junk bond status before we bond more money!
Comment by AC Wednesday, May 24, 17 @ 1:37 pm
==You can bond out $10B to pay off the debt, just as we did with pension obligations.==
Ahh, the glory days of Blagojevich…
Comment by unclesam Wednesday, May 24, 17 @ 1:38 pm
Essentially what IPI is pointing out is that the longer we wait to bring in new revenue, the more it costs us. That is great irony from an organization that thinks we will be fine if we do nothing on revenue.
Comment by Montrose Wednesday, May 24, 17 @ 1:38 pm
That’s what Cullerton was saying way back in February, that because of the retroactive nature, they needed to pass it asap. But Rauner killed the deal back then, and here we are.
Comment by 47th Ward Wednesday, May 24, 17 @ 1:39 pm
Rich, why is Rauner against passing a budget?
Comment by Mama Wednesday, May 24, 17 @ 1:42 pm
So IPI is concerned about the cost, but felt no need to be concerned when Rauner blew up the Grand Bargain, propelling the calendar thru March, April, now May?
I don’t think they know why their concerned(?)
Comment by Oswego Willy Wednesday, May 24, 17 @ 1:43 pm
the 5.81 % rate is a large tax increase for many Illinois taxpayers. It’s sad that many people will have to diminish their standard of living to pay the tax burden because Illinois can’t tax their way out of this problem. Don’t be surprised if Illinois goes into a state wide recession over this. Lastly, a tax on services if certainly going to hit the demand for commercial real estate: more than a few places will not be able to pass on the tax.
Comment by Steve Wednesday, May 24, 17 @ 1:59 pm
===Don’t be surprised if Illinois goes into a state wide recession over this.===
Nothing like gross hyperbole on a Wednesday afternoon.
Comment by Rich Miller Wednesday, May 24, 17 @ 2:01 pm
Ridiculous, luckily it will be vetoed.
Comment by Ron Wednesday, May 24, 17 @ 2:02 pm
Did Illinois policy institute thank Governor Rauner for the delay
Comment by Adults in the room Wednesday, May 24, 17 @ 2:12 pm
This isn’t an easy situation, it’s all about who is going to have to have a diminished standard of living to pay for government. As the saying goes “don’t tax you, don’t tax me, tax the man behind the tree.”
Comment by Steve Wednesday, May 24, 17 @ 2:34 pm
Steve, everyone should feel the full cost of our inept state government. That way people will begin to vote the kleptocrats (Madigan) out of office.
Comment by Ron Wednesday, May 24, 17 @ 3:00 pm
What is the date used for the actual collection of the tax (the date on which it would first be deducted from paychecks)?
I get an unusual date for it to be 5.81%.
Comment by winners and losers Wednesday, May 24, 17 @ 3:11 pm
== You can bond out $10B to pay off the debt, just as we did with pension obligations. ==
The last thing we need right now is more GUARANTEED debt that goes to the front of the payment line.
We also don’t need to be rewarding Rauner’s buddies for helping to create this mess.
Comment by RNUG Wednesday, May 24, 17 @ 4:08 pm
The more it costs, the more tax payers will move out of this state!
Comment by Anonymous Wednesday, May 24, 17 @ 4:28 pm
Steve, everyone should feel the full cost of our inept state government. That way people will begin to vote the kleptocrats (Rauner) out of office.
The only people who can vote Madigan out are the people in his district. They and the rest of us can get rid of Rauner.
Comment by Cheryl44 Wednesday, May 24, 17 @ 4:44 pm
How is a retroactive tax legal??
Comment by Anonymous Wednesday, May 24, 17 @ 7:26 pm
As I understand, at the end of 2017 the new tax rate times your taxable income is the amount you will owe less what was paid in state taxes in 2017. I understand that the state will not take out of your check in the second half for the additional amount owed from first half.
Comment by Cimry90 Wednesday, May 24, 17 @ 8:35 pm