Tax policy clearly divides Republicans, Democrats

SPRINGFIELD - When it comes to state taxes, the Republicans and Democrats running for governor offer voters a clear distinction between the two parties.

Both Democrats - Gov. Pat Quinn and Comptroller Dan Hynes - have proposed raising state taxes along with a mix of cuts to help solve chronic budget deficits.

The seven Republicans seeking GOP voter support in the February primary all say they can balance the budget without higher taxes, though a couple leave some wiggle room.

The Republican candidates are: Hinsdale businessman Adam Andrzejewski, Bloomington state Sen. Bill Brady, Hinsdale state Sen. Kirk Dillard, Chicago businessman Andy McKenna, Chicago political consultant Dan Proft, former Attorney General Jim Ryan of Elmhurst and DuPage County Board Chairman Bob Schillerstrom from Naperville.

Unless lawmakers and the current governor - Quinn - come to some kind of budget-balancing deal in the coming months, it's likely the next governor will inherit a substantial budget deficit and backlog of bills upon taking office in early 2011.

The existing budget, which runs through June 30, was balanced by borrowing $3.5 billion to make the required payments to the state pension account, used billions in federal stimulus money to plug holes in the education and health care budgets and simply won't pay on time $4.5 billion to those who do business with or get payments from the state. So far, that's meant nonprofit social service agencies, universities, community colleges, school districts and just about everyone else who has a claim pending must wait months to get paid.

The deficit is expect to exceed $11 billion, but many political observers are skeptical the General Assembly will be quick to act on a real budget solution in an election year and this financial nightmare will await the next governor.

In recent weeks, the Daily Herald has covered debates, checked campaign platforms and had the field of hopefuls appear before the editorial board in an effort to decipher where they stand.

Democrats differ on increases

The race to win the Democratic nomination could boil down to a contest over whose tax increase Democratic voters like most.

Quinn's backed a two-year increase in individual and corporate income taxes that would raise the individual income tax to 4.5 percent from 3 percent, and the corporate rate would go to 7.2 percent from 4.8 percent. The result would be nearly $4.5 billion more for state spending.

His plan also triples the personal tax exemption to $6,000, a move his aides say will offset any tax increases for nearly half of all Illinoisans.

Quinn also proposed cutting $2 billion through efforts such as eliminating 2,600 jobs, requiring a dozen furloughs and finding $140 million in health care efficiencies. He also supports moving newly hired employees to a new pension system in which they'd generally pay more and have to work longer to get a state pension.

Win or lose, Quinn's scheduled to unveil his budget proposal for the state's next fiscal year within weeks of the primary contest.

Hynes' plan would end the flat-tax rate and impose increasingly higher tax rates on higher income brackets beginning with income over $200,000 a year. Incomes under that amount would stay at the 3 percent income tax rate. Between $200,000 and $300,000 the tax rate would be 3.5 percent. Between $300,000 and $500,000 the tax rate would be 5.5 percent. Between $500,000 and $1 million the tax rate would be 7 percent and over $1 million the rate would be 7.5 percent.

Doing this requires a constitutional amendment. Hynes wants lawmakers to approve putting the tax bracket idea on the November ballot.

Hynes' plan calls for imposing the sales tax on luxury services such as Botox that are now tax-free. He'd also increase the cigarette tax by $1 per pack, expand the casino fleet and increase gambling taxes.

Among the cuts he's proposed is firing thousands of high-paid state employees hired by the scandal-marred administrations of George Ryan and Rod Blagojevich.

However, to date, the bulk of Hynes' and Quinn's plans have been rejected by lawmakers. Quinn said he'll continue to work with legislators to balance the budget while Hynes said he believes he can be more persuasive in selling his agenda.

GOP all anti-tax

While the Democrats battle over whose tax hike is best, the Republicans are fighting each other for the title of most virulent anti-tax candidate on the ballot.

Andrzejewski said he'd veto any tax increase as governor, and if one's approved before he takes office he'd use his powers to try to roll it back.

Brady's budget plan cuts taxes by $1 billion, including rolling back $300 million in business tax and fee increases imposed during former Gov. Rod Blagojevich's first term in office. Brady also proposed removing the state's sales tax on gasoline.

Dillard touts his budget-balancing experience while working for then-Gov. Jim Edgar in the 1990s. He's proposed tax breaks for businesses and other measures to improve the business climate.

Dillard recently told reporters he has "no designs to raise any taxes."

"But everything must be open when you have a record budget deficit, the second biggest deficit in the United States of America, everything needs to be out there, but it is absolutely the last resort," Dillard said.

Asked recently what would qualify as a "last resort," Dillard said he didn't know.

McKenna cautioned a tax increase could drive up unemployment. "I am prepared to roll back spending to 2006 levels, and freeze those levels until revenue can catch up," he said.

Proft says his tax opposition is absolute and proposes cutting the state income tax in half. However, if taxes are raised before he would take office, Proft said he would work to roll them back, "but only when we successfully balance the Illinois budget without accounting gimmicks."

Ryan opposes raising taxes during a recession but didn't rule out such action once the economy recovers. He's said balancing the current state deficit "probably cannot be done in a year - the hole is too deep."

Schillerstrom said he does not support any tax or fee increases. "Illinois families are already sacrificing and making difficult choices - it is time for their government to do the same," he said.

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<li><a href="/story/?id=347848">Budget woes raise tough questions for GOP hopefuls<span class="date">[1/4/09]</span></a></li>

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