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Tax hikes stall at Capitol: Democrats likely to punt on budget fix

Posted May 31, 2009 11:00 pm

By John Patterson Daily Herald Staff

SPRINGFIELD - The Illinois House voted down a temporary tax increase Sunday, with members saying a similar fate awaited an even larger tax increase plan as the General Assembly rushed toward a midnight deadline, resigned once again to leave the Capitol without a balanced budget.

A two-year increase in individual and corporate income taxes was rejected, getting just 42 votes with 74 in opposition. The proposal, backed by Gov. Pat Quinn, would have taken the individual income tax to 4.5 percent from 3 percent, and the corporate rate would have gone to 7.2 percent from 4.8 percent. The result would have been nearly $4.5 billion more for state spending.

Earlier Sunday, a House education committee had endorsed raising the personal and corporate tax rates to 5 percent and applying the state's sales tax to services such as dog grooming, bowling and a litany of other services that are now tax-free. That plan had narrowly passed the Illinois Senate late Saturday.

But House members said it too lacked the votes for approval.

While an apparent win for taxpayers, the deadlock comes as the state faces a two-year, $12 billion budget deficit with no real plan for fixing it. Lawmakers instead approved a budget that would let Illinois capture billions in federal stimulus money to pay for education and health care but won't cover most other spending for the entire year. The plan has about half the money necessary for a full year and would leave it up to the agencies to figure out how to spend it.

Quinn called the moves disappointing.

"We're going to have to stay after school," the governor told reporters after the tax defeat. He said meetings are planned Monday with legislative leaders to try to steer talks toward a real balanced budget.

"As long as I'm governor we're not going to have a convenient approach to the budget that leaves some people high and dry," Quinn said.

The political punt on the budget deficit is similar to what Democratic leaders did last year. Unable to find an agreement on how to plug the budget hole, lawmakers sent an unbalanced budget to then-Gov. Rod Blagojevich and told him to use his executive authority to fix it.

He responded by closing state parks and historic sites and proposing hundreds of layoffs.

This time, instead of containing too much money, the budget likely to land on Quinn's desk won't have enough to get the state through the year, forcing him to either make drastic cuts or try again to sell a tax hike in the coming months.

And he might have to do that in the heat of a Democratic primary for governor, one that could pit Quinn against Attorney General Lisa Madigan, the daughter of House Speaker Michael Madigan.

"The real question is: Are you playing politics and why, and for whose benefit?" House Republican leader Tom Cross of Oswego said of the Democrats who control the chamber.

No House Republicans voted for the temporary tax increase, nor did they support the bigger tax plan in the earlier committee vote.

Only four Daily Herald-area House members were among the 42 "yes" votes on the temporary tax: Aurora Democrat Linda Chapa LaVia, Northbrook Democrat Elaine Nekritz, Vernon Hills Democrat Kathleen Ryg and Waukegan Democrat Eddie Washington.

"Even though I didn't want to take that vote, that's what the people in the district have been e-mailing and asking me to do," Chapa LaVia said. "People are going to have to suffer over the summer because of the unwillingness to work."

Nekritz said the temporary tax might not be the only option, but if it is "there are going to be some shocks to the system out there."

Lawmakers faced a midnight deadline for approving a budget, or an overtime session that makes approval politically tricky.

Democrats control state government but after midnight, approving a budget or just about anything else requires support of 60 percent of the House and Senate. In the House, that would force Democrats to reach across the aisle for Republican help.

But Republicans say they've been left out of talks to this point and aren't quick to help the Democratic majority pass tax hikes.

"You can't come over to us on the last night and say, "let's be bipartisan," Cross said during the tax debate.

But Quinn said Republicans wanted to be able to say they voted against taxes and predicted they'll flip in the coming weeks and put votes on a tax increase.

Cross said his members want meaningful changes to pension debt and health care spending before tax hikes are on the table.

"We're not voting 'no' for the sake of voting 'no,'" Cross said.

• Staff writer Nicole Milstead contributed to this report.

What would have been taxed SPRINGFIELD - Illinois currently doesn't apply its 6.25 percent sales tax on services such as movie rentals, carpet cleaning, dog grooming and a number of other such services. That would have changed under a budget-balancing plan that cleared the state Senate but was never considered by the Illinois House. Here are the services that were listed in the proposal: Warehousing and storage Travel agent services Carpet and upholstery cleaning services Dating services Dry cleaning and laundry, except coin-operated Consumer goods rental Health clubs, tanning parlors, reducing salons Linen supply Interior design services Other business services, including copy shops Bowling centers Coin operated video games and pinball machines Membership fees in private clubs Admission to spectator sports (excluding horse tracks) Admission to cultural events Billiard parlors Scenic and sightseeing transportation Taxi and limousine services Unscheduled chartered passenger air transportation Motion picture theaters, except drive-in theaters Pet grooming Landscaping services (including lawn care) Income from intrastate transportation of persons Ministorage Household goods storage Cold storage Marina service (docking, storage, cleaning, repair) Marine towing service (including tugboats) Gift and package wrapping service Laundry and dry cleaning services, coin-operated Other services to buildings and dwellings Water softening and conditioning Internet service providers Short-term auto rental Information services Amusement park admission and rides Circuses and fairs - admission and games Cable and other program distribution Rental of videotapes for home viewing Source: HB174

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