SPRINGFIELD — On the campaign trail, Gov. Pat Quinn told voters he'd veto any income tax hike that would raise Illinois' rate over 4 percent.
But Wednesday Quinn said he'll sign into law a plan to raise the rate by 2 percentage points, to 5 percent.
That'll raise individual income taxes by 66 percent, compared to the 33 percent he said was his limit. The taxes on businesses also will increase — from 4.8 percent to 7 percent.
A 1 percentage point increase, Quinn said in July when he was trying to persuade voters to elect him, “is all that I propose and all that I support. ... I'm going to veto anything that's not my plan.”
But as business leaders, Republicans and some taxpayers decried the last-minute tax hikes Wednesday, Quinn defended the plan as one that could start pulling the state from the depths of its deep financial hole. He sidestepped questions about his flip-flop, saying this is the right thing to do.
“Our fiscal house is burning,” he said. “It's important for state government not to be a basket case.”
Once Quinn signs the plan, the new, higher tax rate would become effective immediately, retroactive to Jan. 1.
Republicans sharply criticized the tax hikes, saying they are especially harmful without state budget cuts and would kill jobs just as businesses were getting back on their financial feet.
“This is the nuclear bomb of jobs bills,” said Sen. Dan Duffy, a Lake Barrington Republican.
Yet Quinn thanked lawmakers who approved the tax increases, and he shot back at the governors of Wisconsin and Indiana who had taunted him and Illinois Democrats in recent days over raising taxes and perhaps pushing businesses to their states.
The tax rates are temporary — meaning they'll be in place for four years, when the individual rate will drop to 3.75 percent and the corporate to 5.25 percent, both of which are higher than what was in place before lawmakers approved the hikes.
But some residents aren't buying “temporary,” whether they agree with the increases or not.
“It'll never come back,” Wheaton resident Dan Simmet predicted. “I think the tax is appropriate because the state is broke. But they originally said state taxes would only be temporary and here we are, 40 some years later, still paying them.”
House Republican Leader Tom Cross echoed that prediction: “I think it's clearly false,” he said of the idea the increases are temporary.
Temporary or not, they are intended to pull the state from the brink of financial collapse, which some argue started years ago.
The trade-off would be that millions of Illinoisans, many of whom face employment uncertainty and years of working without raises and pay reductions, could see their paychecks decrease once employers make changes to their withholdings.
Businesses with tight budgets, Republicans warned, could stop hiring or leave Illinois.
The tax plan was passed with the minimum number of votes needed in both the House (60-57) and the Senate (30-29), which went into the middle of the night Wednesday debating before voting.
“We're going to pay our bills,” said Sen. Dan Kotowski, a Park Ridge Democrat. “We're going to educate our children.”
But a plan to borrow nearly $9 billion to pay down the state's still-growing piles of unpaid bills was rejected twice by the House and remains in limbo for the immediate future. A smaller borrowing plan to take about $4 billion in loans and pay for public workers' retirement was approved by the Senate and sent to Quinn.
The plan comes with a 2 percent yearly cap on future spending increases. If lawmakers spend more than law allows in future years, the tax increase would be nullified.
“This is not a game, not a trick. This is a real spending cap,” said Senate President John Cullerton, a Chicago Democrat. “We're really trying to handcuff ourselves, and the governor, in our spending.”
Republicans said, though, the cap merely ensures lawmakers will continue to spend 2 percent more a year instead of cutting spending back.
The debate in both the House and Senate was heated. In the Senate, as debate sped past 1 a.m. Wednesday, senators paused for more than 15 minutes when Rep. David Miller, who was observing the debate, collapsed on the Senate floor.
Miller, a Democrat from Lynwood who most recently lost a bid for Illinois comptroller, was taken from the floor on a stretcher. Miller was released from the hospital later Wednesday morning and drove himself home to South suburban Lynwood, a spokesman said.
&bul; Daily Herald staff writers Lee Filas and Jeff Engelhardt contributed to this report.
Changes to your check
Once the state income tax increase takes effect, it'll be the third change to your withholding on your 2011 paychecks. Here's what those changes are:
&bul; Federal: Tax may increase if you were eligible for the Making Work Pay tax credit that expired at the end of 2010. Generally, it was worth $400 for individuals and $800 for married couples.
&bul; FICA: A 2-percentage-point reduction in withholding on income eligible for Social Security went into effect at the beginning of the year.
&bul; State: Increase of 2 percentage points on your 2011 income, minus any deductions, will be withheld soon after the governor signs it into law. At tax return time in April 2012, some might see a smaller refund or have to pay a bit more to make up for paychecks issued before the withholding began.
Sources: IRS.gov, Illinois Governor's Office of Management and BudgetCopyright © 2013 Paddock Publications, Inc. All rights reserved.