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Quinn proposes making income tax hike permanent

Published: Wednesday, March 26, 2014 9:30 a.m. CDT • Updated: Wednesday, March 26, 2014 11:15 p.m. CDT
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Gov. Pat Quinn delivers his annual budget address to a joint session of the General Assembly in the House chambers at the state Capitol, March 26, 2014, in Springfield. (AP Photo/Seth Perlman)
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FILE - In this Jan. 23, 2014 file photo, Illinois Gov. Pat Quinn delivers the State of the State address at Capitol in Springfield. (AP Photo/Seth Perlman, File)

SPRINGFIELD (AP) – Gov. Pat Quinn outlined his case Wednesday for making Illinois' temporary income tax increase permanent, predicting "extreme and radical" budget cuts to schools and services without additional revenue.

The Chicago Democrat – embarking on what's expected to be a tough re-election bid against Republican businessman Bruce Rauner – tied the idea to relief for homeowners, saying he'd like to guarantee every Illinoisan who pays property tax a $500 annual refund. He also called for increasing the earned income tax credit for low-income families.

"If action is not taken to stabilize our revenue code, extreme and radical cuts will be imposed on education and critical public services," he said in the roughly 30-minute address before lawmakers. "Cuts that will starve our schools and result in mass teacher layoffs, larger class sizes and higher property taxes."

The question of what to do with the expiring income tax increase has nagged lawmakers and candidates for months. Extending it won't be politically easy. Polls show that most Illinois voters would rather cut existing spending than increase revenue. And Quinn's budget address – which he delayed until after the primary elections – already is being viewed with election-year scrutiny.

Rauner and his fellow Republicans immediately blasted Quinn's proposal, saying he went back on his word because the roughly 67 percent income tax increase approved in 2011 was billed as temporary.

"After 5 years of Pat Quinn's failed leadership, we have record tax hikes, outrageously high unemployment, massive cuts in education, and there's still a giant budget mess in Springfield," Rauner said in a statement. "We can balance the budget without more tax increases, if we create a growth economy, and restructure and reform our broken government."

Other top Republicans said Quinn didn't address the state's high unemployment or go far enough on other fiscal issues, like the state's billions in unpaid bills.

The state will see a roughly $1.6 billion revenue dip if the tax increase rolls back in January as scheduled. State agency officials for weeks have been predicting dire cuts if that happens.

Quinn said without the increase there would be about 13,000 teachers laid off and 41,000 fewer children in child care.

He said maintaining the tax rate would be a "hard choice" but vowed not to institute new taxes on "everyday services" that working people rely on. He said he'd like to double the state's earned income tax credit, to help poor families keep more of what they earn, over the next few years.

Democrats credited Quinn with taking a bold step.

"I would commend the governor for his political courage and honesty, unlike previous governors," House Speaker Michael Madigan told public television show Illinois Lawmakers. "He told the truth. He laid the cards on the table. If we wish to continue to provide the level of services we've become accustomed to education and other services, then the tax increase should be extended."

Madigan added that he plans to call for a vote on the income tax increase.

Still, Quinn's budget proposes an increase in spending over last year, setting up what's likely to be a difficult budget battle.

Budget documents show a $36.8 billion state spending plan, including more for education, public safety and courts if the extension is in place. That's a roughly 4 percent over last year when lawmakers approved a $35.4 billion budget. Quinn budget director Jerry Stermer said part of the increase addresses rising costs. He said Illinois is still saving money from Quinn's past decisions, including closing state facilities, a re-negotiated union contract and a Medicaid overhaul.

House Republican Leader Jim Durkin called Quinn's speech "rhetoric" that didn't address Illinois' high unemployment.

"I would have hoped to have heard something of how we can do that, how we can turn that tide other than we're going to tax, tax, tax," he said. "I don't believe that we can tax our way to prosperity."

Quinn played down the call for extending the tax increase during the speech, referring to it as "maintaining" current rates. He's been mum for weeks on what he'd planned to do.

The push to make the increase permanent comes as Illinois is also grappling with billions of dollars in unpaid bills, a low credit rating and uncertainty with the state's pension debt.

Quinn briefly recapped his signing of a landmark pension overhaul, which he's called one of his biggest accomplishments. But the proposed budget won't contain the estimated savings. The overhaul that cuts benefits for state employees and retirees is undergoing a legal challenge by unions that contend it's unconstitutional.

November's election will determine whether Quinn gets a second full term.

Republicans and business groups have vowed to fight any extension of the temporary income tax hike and claim testimony from state agency officials predicting dire cuts has been overblown to justify keeping it. They've called for cutting spending and limiting new programs.

Lawmakers must approve a budget for the new fiscal year, which starts July 1, by the end of May.

Reaction from local lawmakers

Sen. Tim Bivins, R-Dixon

"I thought the governor's speech was weak. He didn't give us the specifics he promised, which leads me to believe the numbers aren't that pretty." 

"He's had ample time and billions of dollars in new spending to turn this thing around, and hasn't been able to do it so far." 

 "The party in leadership has an obligation to keep their word on letting the tax hike sunset, and Illinoisans would be better off for it." 

Rep. Tom Demmer, R-Dixon 

"It’s the one thing that is going to affect every single person in Illinois who earns any money here. There are some proposed offsets for property tax, for homeowners and property owners and that affects far fewer people than the income tax increase does."

"When the governor laid out the tax increase in 2011, he was either not looking correctly at the state of Illinois’ situation at the time and thinking that it was going to be easier to resolve than it was, or just didn’t follow through with the promises that he made."

"We have a hard time believing that we’re going to follow through on the plans for spending in any category now that we’ve seen the 2011 tax increase didn’t go to the places that it was promised to go either."

Sen. Mike Jacobs, D-East Moline: 

"I thought it was one of the governor's better speeches. I thought it was responsible, and I thought he was very honest." 

"It's very easy to tell people what they want to hear. But it's more difficult to tell them the truth. The rubber has met the road in our state." 

"I really like that the governor has a 5-year blueprint for Illinois. To my knowledge, that's the first time of anyone ever thinking we should have planning for the future. And that's a sad fact, but it's true. His policies have been helpful for getting this monster under control." 

"The governor laid out the fact that if we are going to cut billions from the budget, what's that mean to real voters? The government provides a lot of services to people that many people don't realize." 

"I'm not opposed to cutting the services. However, if we're going to cut the services, people shouldn't complain when it happens. Or we can keep the tax and hold steady. It's a pretty clear choice." 

Rep. Mike Smiddy, D-Hillsdale:

"We need to sit down and look at things before and after in regards to the 2 percent increase being permanent. We’ll have to see what programs are looking at being cut, where we can cut back legitimately."

"I think intensions were to make a temporary tax increase on income but no one could have forecasted the economy going as bad as it did between 2009-2010."

Source: Illinois News Network

Tweet, tweet

What state Rep. Tom Demmer, R-Dixon, had to say on Twitter during Wednesday's budget address by Gov. Pat Quinn:

Gov. Quinn says we're in position to balance the budget – isn't that a requirement every year?

If budget wasn't balanced in previous years, why did Gov. Quinn sign them?

Sure Medicaid reforms have been passed, but they're way behind schedule in savings.

Issue of "expiring revenue" sounds different than Gov. Quinn promising and signing a temporary income tax increase.

Don't forget, Gov. Quinn signed the temporary tax increase bill. He knew it was temporary.

Gov. Quinn proposes making income tax hike permanent, giving $500 to homeowners each year in property tax rebate.

Gov. Quinn says property tax is an unfair tax.

Gov. Quinn: "We will not accept higher and higher property taxes." But apparently he will accept higher and higher income taxes.

Gov. Quinn looks for "rainy day fund." Do we really trust him with a pot of money? See: Neighborhood Recovery Initiative

Gov. Quinn: We can encourage more dual enrollment in advanced college courses. #agreed

Gov. Quinn: "We can't cut our way to prosperity." But, we can tax our way to prosperity?

Gov. Quinn keeps referring to balancing the budget as a new thing. Check the Constitution, it's already required.

___

Associated Press writers John O'Connor and Chacour Koop contributed to this report.

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