SPRINGFIELD — State lawmakers elected in November will face a big decision before their terms end — whether to extend the 2011 income tax hike or let it expire on schedule.
The state’s 5 percent personal income tax rate is set to roll back to 3.75 percent on Jan. 1, 2015, unless lawmakers act to extend it. The corporate rate is set to drop, too.
That will be in the closing days of the terms of Illinois House members elected Nov. 6.
The income tax uncertainty also could set up lawmakers elected this fall for a big budget battle in May 2014. With the income tax issue unlikely to be settled by then, lawmakers will have to craft a budget that assumes reduced revenue for half the fiscal year. That could force tough choices about cuts to schools, care for the disabled and other services.
It’s a prickly topic for many suburban candidates.
In one of the closest battles for Illinois Senate, for example, Democrat Melinda Bush of Grayslake says the income tax should expire as planned. Her opponent, Republican Joe Neal of Wadsworth, wants the tax hike repealed immediately — a political impossibility with Gov. Pat Quinn in office.
Running against the largely Democratic-backed tax hike has been a GOP strategy since it was implemented, as Republicans argue families facing their own uncertain financial futures didn’t need the extra burden of losing 2 percent more of their incomes to the state.
State Sen. Matt Murphy, a Palatine Republican, was among the lawmakers who immediately tried to have the income tax hike repealed in 2011, filing legislation to do just that.
His opponent, Democrat David Page of Arlington Heights, told the Daily Herald in a questionnaire that he doesn’t want the tax increase extended, either.
What makes the issue sticky is that the income tax generates $7 billion a year in a state with a financial future that is far from certain. Illinois has $9 billion in unpaid bills and a yearly payment into teachers’ and employees’ retirement funds that continues to rise, taking money away from other services like public schools and programs to help the poor.
How the controversial plans to cut pension costs fare in the coming months could go a long way toward determining the state’s budget outlook in coming years. But pension changes are likely to be challenged in court, perhaps keeping the state from seeing any savings for months or even years.
Lawmakers’ choice between the income tax and service cuts won’t necessarily be black and white, noted Charles N. Wheeler III, a longtime state budget observer at the University of Illinois Springfield.
Lawmakers could opt, for example, to let the income tax hike expire and do something else to bring in more money, such as change sales taxes.
Positions voiced on the campaign trail might not necessarily pan out during an actual vote, especially if the future of the income tax is brought to a vote during the lame duck session — after the November 2014 election but before the new lawmakers take office in January.
That’s what happened in 2011, when lawmakers approved the income tax increase the day before the new class took office. Former state Rep. Mark Walker, an Arlington Heights Democrat, voted for it.
He had lost his race in November 2010 and had said in the campaign he didn’t want to raise taxes.
But, Walker said, he noted the state was facing its biggest-ever deficit — a hole of $15 billion — and decided it needed more money.
“When it came to the vote on the day, I had to weigh all these different things,” he said.Copyright © 2013 Paddock Publications, Inc. All rights reserved.