Rejection of tax plan means hard decisions

Illinois Gov. Rod Blagojevich. (AP Photo)

E-mail this story

Print this story

Share

SPRINGFIELD - Two months ago, Gov. Rod Blagojevich announced a sweeping plan to expand health care, boost school spending and raise business taxes to pay for it. He told lawmakers, essentially, take it or leave it. Now, most lawmakers are prepared to leave it, but that means they must come up with a budget plan of their own, a task that requires one tough decision after another.

Do they give more money to schools? Do they expand health care? Are those services more important than transportation and reducing state debt? And if they decide to spend more money, where will they get it?

Not only will lawmakers have to reach some consensus, but they must be prepared to fight the governor, who isn't giving up on his own plan.

"The easiest thing you can do in the General Assembly is say what you are against," Senate President Emil Jones, who supports the governor's plan, told his Republican critics, "but sometimes in life you have got to be for something."

The task of figuring out what lawmakers can support began in earnest Thursday, when the Illinois House crushed Blagojevich's $7.6 billion tax on business transactions. Representatives voted on a resolution asking whether they supported the tax, and 107 of them said "no." Not a single person supported it.

Most lawmakers immediately declared Blagojevich's plan dead and began talking about what to do next. The problem is that the 177 lawmakers could probably come up with 177 different proposals.

Some are talking about passing a "maintenance" budget that would leave spending at current levels, with no new money for schools or health care. Others want to raise income taxes enough to help schools but not do anything about health care. Some insist health care must be part of the mix.

Rep. Mike Boland, D-East Moline, said a likely solution may mean rolling the dice.

"My guess is we will do some expansion of gaming," Boland said.

He believes allowing a few more casinos in the state could jack up revenues enough to pay for critical programs.

This week, House Democrats will meet to discuss potential budget options said Boland.

"We Democrats will meet Tuesday Morning to flesh out some ideas," Boland said.

Another possibility is a tax "swap" that would raise income and sales taxes while cutting local property taxes. And gambling expansion, an idea that comes up year after year, could resurface.

"Everything has been put on the table, and it's just going to be a matter of what can make enough revenue to do what we need to do," said Senate Majority Leader Debbie Halvorson, D-Crete.

Blagojevich, Jones and House Speaker Michael Madigan are all Democrats, and Jones and Madigan have nearly total control over which pieces of legislation are considered in their chambers.

Ordinarily, a budget plan would emerge from negotiations among the three of them, but their deep divisions have prevented that this year. Madigan may bring some order out of the chaos in a meeting with his caucus Tuesday.

Madigan hasn't made any budget proposals of his own. It was only on Thursday that he revealed his opposition to the governor's plan. Lawmakers say the powerful speaker intends to lay out the state's expenses and tax options and then push House Democrats to agree on what they will support.

Even if Madigan succeeds, it's only a beginning. Senate Democrats and House and Senate Republicans would have to make similar decisions, then the four groups would have to figure out whether they could work together.

One key question is what Jones will support.

So far, he has backed the governor's proposal for a "gross receipts tax" on business that would provide money for health care and education. If he continues to stick with Blagojevich, it would be nearly impossible to pass any other plan. But if Jones decides that he doesn't care where the money comes from, lawmakers could realistically consider raising income or sales taxes.

Jones spokeswoman Cindy Davidsmeyer said the president remains committed to the gross receipts tax and it's too early in the negotiating process to write it off, but Halvorson, the Senate's No. 2 Democrat, said the tax is in serious trouble.

"We're going to have start talking about a Plan B," she said.

An increase on income or sales taxes wouldn't be easy, no matter what Jones and other leaders decide.

"That option doesn't exist," Blagojevich warned lawmakers, promising to veto any increase and fight as hard as possible to block any override attempt.

Three-fifths of the General Assembly would have to support the tax and then withstand all gubernatorial pressure before an increase could become law. That would require the Democratic majorities in the House and Senate to cooperate with the minority Republicans.

Blagojevich appears to be depending on two things to keep his tax plan alive: Jones maintaining his support, and lawmakers failing to agree on any alternative.

Spokeswoman Abby Ottenhoff said that if Jones sticks by the tax, then it remains on the negotiating table. Jones would be able to block any other proposal.

And if lawmakers never reach consensus on any other proposal, then they might look at Blagojevich's plan with fresh eyes. Ottenhoff said the governor is happy to continue modifying the gross receipts tax to make it more palatable.

"As lawmakers go through that full process, I expect that the revenue proposal the governor put forward will be a very viable option," Ottenhoff said.

Revenue ideas being discussed

A look at some of the revenue ideas at the Illinois Capitol as officials try to come up with a new budget:

* Gross receipts tax:

The goverznor's proposal for a $7.6 billion tax on business transactions. Companies with under $5 million in revenues essentially would be exempt. Critics say it would force companies to raise prices and cut jobs.

* Income tax:

Supporters say an income tax increase would be the fairest way to pay for government services, and suggest tax breaks to reduce the impact on poor families. Gov. Rod Blagojevich vows to veto any increase.

* Sales tax:

Only merchandise is subject to the Illinois sales tax, but it could be broadened to apply to services, such as a haircut or dry cleaning. Blagojevich vows to veto that idea.

* Tax swap:

An increase in income and sales taxes, coupled with a decrease in local property taxes. This idea has been discussed for years and seemed to be gaining speed before Blagojevich introduced the gross receipts tax.

* Alternative minimum tax:

Businesses that end up owing no state income taxes could be required to pay an alternative tax, something that is done at the federal level. This would address the governor's complaint that many businesses don't pay income taxes.

* Gambling:

The state could get more revenue by letting riverboat casinos expand, allowing slot machines at racetracks or even legalizing keno, something Blagojevich proposed last year.

* Payroll tax:

Blagojevich has proposed a $1 billion tax on business payrolls to help support health care programs.

* Maintenance budget:

Many Republican lawmakers favor passing a budget that would maintain current spending levels, meaning no increases for schools or health care.

Telegraph Reporter Andrew Walters and Associated Press reporters Christopher Wills and Ryan Keith contributed to this report.

© Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.