By the Illinois News Network: The next paycheck Illinois’ workers receive will have less money in it than the one before it. So will the one after. And the one after that.
The state House on Thursday effectively enacted a permanent 32 percent income tax increase as well as a corporate tax hike when it voted to override Gov. Bruce Rauner’s vetoes of budget bills that include more than $5 billion in new revenue and $36.5 billion in spending.
For the first time in more than two years, the state has an enacted budget, meaning schools will open on time, human service providers will be paid, and transportation projects that were suspended at the end of June can resume.
But the budget comes at a significant cost to taxpayers.
House Speaker Michael Madigan got exactly the 71 votes he needed to overturn Rauner’s vetoes. Ten Republicans joined 61 Democrats in voting to override. When the tax hikes were initially approved in the House on Sunday (before Rauner’s veto), 15 Republicans and 57 Democrats voted in favor.
As evidence that many of the votes were politically motivated, Madigan got four more Democrats, all from districts that will be contested in next year’s election, to vote for the override after five formerly “yes” Republicans defected.
“The people in this chamber did not do what was easy today, but we did what was right for the future of our state,” Madigan said on the House floor. “There are a lot of things that will be said about this vote, but the most important thing I can point to is that Republican legislators and Democratic legislators got this done together.”
Rauner, who has pushed for a property tax freeze and significant reforms to pensions, workers’ compensation and spending before signing off on an income tax hike, called the override a tragedy.
“Today was another step in Illinois’ never-ending tragic trail of tax hikes,” Rauner said in a statement. “Speaker Madigan’s 32 percent permanent income tax increase will force another tax hike in the near future. His tax-and-spend plan is not balanced, does not cut enough spending or pay down enough debt, and does not help grow jobs or restore confidence in government.”
Madigan and former Gov. Pat Quinn pushed through a temporary income tax hike in 2011 that partially sunset shortly before Rauner took office. Then, as now, Madigan said the tax hike would help stabilize Illinois’ dismal finances. Instead, the state’s condition worsened.
Illinoisans pay among the highest property taxes in the country and the highest combined local and state taxes of any U.S. state. It’s lost more people to outmigration than any other state over the past three years. And Madigan has been Speaker for all but two years since 1993. Before his current term is up, he will be the longest House Speaker of any state in the history of the country.
“It proves how desperately we need real property tax relief and term limits,” Rauner said. “Now more than ever, the people of Illinois must fight for change that will help us create a brighter future.”
Families with household income of $60,000 will pay the state about $720 more every year, or $60 a month now that the rate jumps to 4.95 percent from 3.75 percent. The corporate tax rate spikes from 5.25 percent to 7 percent.
Americans for Prosperity of Illinois’ Andrew Nelms said Illinoisans are going to be asked to cut more from their budgets to pay for state government status quo.
“This is going to fuel the poor decisions of our chronically irresponsible legislature, for years,” Nelms said.
Democrats and some Republicans that supported the override on the $5 billion tax increase said the state couldn’t wait any longer.
But others said it will do much more harm than good.
“Today’s action by the Illinois legislature will speed up the loss of manufacturing jobs and will further decimate our economy,” said Greg Baise,
president and CEO of the Illinois Manufacturers Association.
While the number of manufacturing jobs in Illinois has declined significantly over the years, since 2009, neighboring Michigan has added
163,000 manufacturing jobs, Indiana 90,000, Ohio 83,000, and Wisconsin 43,000. The nation’s highest property taxes and Midwest’s highest workers’ compensation costs are two major reasons why Illinois lags.
Republican state Rep. Brad Halbrook said the structural reforms Rauner wants are needed or the state’s fiscal climate will continue to get worse.
“We just handed the citizens of the state of Illinois a huge income tax increase, no relief on property tax,” Halbrook said. “Many speakers today talked about the family and friends leaving the state of Illinois. This is going to continue.”
During debate on the House floor, Rep. Tom Morrison, R-Palatine, said the budget and tax hike plans would make things worse for a state that has a backlog of unpaid bills totaling $15 billion, more than $130 billion in underfunded pensions and a credit rating just above junk, with the threat of another downgrade looming.
“It’s not going to solve our problems unless we address the fundamental reforms,” Morrison said, referring to property taxes, pensions, workers compensation and spending. “It will hurt. We’re taking more money out of the private economy and allowing the public sector to grow. … This is the wrong path.”
Moody’s on Wednesday issued a statement saying it might still downgrade Illinois’ credit rating to junk status even with a tax hike and balanced budget because of the state’s backlog of bills and pension debt.
“This budget is junk,” Rep. Allen Skillicorn, R-East Dundee, said. “This budget and massive tax hikes don’t address” Illinois’ failing pension systems.
Rep. Keith Wheeler, R-Oswego, criticized the reforms that Democrats claim are compromises with Rauner as weak, saying they won’t help the state’s fiscal crisis or boost its stagnant economy.
“Those lipstick reforms won’t cut it,” Wheeler said. “For two-and-a-half years w’eve been working on those real reforms. … We can’t just pass reforms in name only.”