New income tax proposal emerges in Springfield
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SPRINGFIELD — The same day lawmakers left Springfield without a deal on pension reform, a suburban Democrat filed legislation to amend the constitution and potentially lower income taxes for some Illinoisans and raise it for others.
And in fact, House Democrats filed a nearly identical plan the same day, suggesting a battle to overhaul Illinois' income taxes completely could be a big topic of discussion over the next year.
Unlike the federal government, Illinois now taxes people's income at the same flat rate of 5 percent, no matter how much money they make. The state's constitution demands a flat rate, so a change to tax earnings based on how much income people have would require an amendment.
State Sen. Don Harmon, an Oak Park Democrat and a top member of his party's leadership team, is behind the proposed amendment in the Illinois Senate. He says as the state's 2011 income tax hike is set to expire, it's inevitable that lawmakers will be talking taxes soon.
"I think we have to build momentum," Harmon said. "It will inevitably be part of the debate."
The debate has already started in some forms.
Teachers union leaders have been talking about the issue with their members this year, and the conservative political action committee Americans for Prosperity has been working against the idea with ads online.
State Rep. David McSweeney, a Barrington Hills Republican, has amassed 46 opponents to a graduated income tax in the Illinois House, two short of the number he needs to eventually block it. He says he's still looking for two more.
"I'm going to work it nonstop," McSweeney said.
The battle over taxes could be the biggest budget challenge lawmakers face next year, perhaps bigger than the ongoing pensions battle. The income tax hike is set to expire in January 2015, halfway through the state's budget year.
When Fitch's downgraded Illinois' credit this week, it cited its $100 billion in pension debt, first. But, second, the agency pointed to long-term issues with the state's tax structure.
Harmon said his proposal would be more fair than the existing flat tax, which he says is harder on low- and middle-income people.
Voters would have to approve an amendment after lawmakers do, so a change is nowhere near imminent. And actual tax rates would be set only after that, so it's unclear how individual taxpayers would be affected. Still, the timing of Harmon's proposal suggests lawmakers will be discussing the concept.
"I wanted to make sure it was on file and available for sessions over the summer," Harmon said.
Gov. Pat Quinn on Thursday announced he'd be calling lawmakers back to Springfield June 19 to try to tackle the pension proposals they left behind last week.
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