The state’s two-year budget impasse came to a temporary end this week as the General Assembly, despite vetoes by Gov. Bruce Rauner and objections by a majority of Republican legislators, including Sen. Rezin, passed a budget that contained a permanent 32 percent income tax increase, while failing to incorporate any meaningful government reforms.
Senate Republicans are standing firm in their call for true, lasting, structural reforms that will help stabilize state government for years to come. Only through true property tax relief, meaningful workers’ compensation reform and a fair and equitable school funding reform model will Illinois have a strong foundation for future job growth and education excellence.
At What Cost?
The state's personal income tax rate, which goes into effect retroactive to July 1, will increase from 3.75 percent to 4.95 percent, and the corporate income tax rate would increase from 5.25 percent to 7 percent.
How will these increases affect Illinoisans? According to the Daily Herald:
• A single person who earns $34,000 a year would pay an additional $382 a year.
• A family of three making $75,000 a year would pay an additional $822 a year.
• A family of four earning $150,000 a year would pay an additional $1,695 a year.
• A 66-year-old retiree who has $5,000 in taxable earnings plus Social Security and pension income, which are not taxed in Illinois, would pay an additional $22 a year.
Wall Street’s Not in the Mood
On July 5, the day before the Illinois House voted to override the Governor’s veto, Moody’s announced they were continuing to review the state's current Baa3 level for a possible downgrade despite "legislative progress toward a fiscal recovery plan based on permanent income tax rate increases." Of particular note, Moody’s states that the plan “appears to lack concrete measures that will materially improve Illinois’ long-term capacity to address its unfunded pension liabilities.”
Senate Republicans continue to reiterate that a tax increase alone won't solve Illinois’ fiscal problems. The state needs a balanced budget, with reforms, which will help pay down the $15 billion in unpaid bills and address Illinois' mountain of pension liability. Lawmakers should return to the negotiating table and continue working toward a bipartisan compromise that was so close to being reached before the Speaker ran his 32 percent tax increase and budget. To celebrate what passed last week is premature.