With Illinois, which on Saturday morning entered its third fiscal year without a budget, facing a catastrophic downgrade, late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse. The bill passed 72-45. The House also approved a $36 billion spending plan minutes later on a 81-34 vote. According to the Sun Times, it cleared an initial hurdle on Friday with 23 Republicans voting “yes.”
“While no one could say this was an easy decision, it was the right decision,” House Speaker Mike Madigan said after the spending bill vote. “There is more work to be done.” Dems said they would work with Republicans on other resolution of other issues on table.
The proposed tax increase will now head back to the Illinois Senate, which approved a revenue bill on May 23 with all Democratic votes as part of its “grand bargain” package. But Governor Bruce Rauner has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions.
Commenting on the just passed House bill, Rauner said he’ll veto the revenue bill.
“I will veto Mike Madigan’s permanent 32% tax hike. Illinois families don’t deserve to have more of the hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs,” Rauner said.
“Illinois families deserve more jobs, property tax relief and term limits. But tonight they got more of the same.” He also said in an emailed statement that “if the legislature is willing to pass the largest tax hike in state history with no reforms, then we must engage citizens and redouble our efforts to change the state.”
Some commentators promptly countered that Rauner’s veto will likely be overriden.
The tax bill passed with some essential Republican support: it needed 71 votes. But Illinois House Republican Leader Jim Durkin questioned how it will address the state’s $14 billion backlog. Durkin is seeking to get Rauner the “balanced budget package,” he wants, which includes spending reductions and “meaningful reforms.”
“I am disappointed that we’re taking this up at this moment when there has been significant, significant progress to address the priorities of the governor and also the priorities of this caucus,” Durkin said.
There are, of course, political ramifications to supporting a tax hike, on both sides of the aisle. Some House Democrats were expected to vote no to try to shield themselves from Illinois Republican Party attacks in next year’s election. But some House Republicans, knowing they’d too be targeted for supporting it. said there’s no other choice.
Others were even more fatalistic: “If I lose my seat so be it,” state Rep. Michael Unes, R-Pekin said, adding the state shouldn’t have gotten so close to a financial collapse. “Without this, we will lose thousands of lives and thousands of jobs and the alternative is so much worse. I don’t like this. This is not easy. This is really, really difficult,” Unes said. “But the alternative is much worse than this. The alternative is literally taking our state off the cliff.”