Civic Federation backs income-tax hike

A nonpartisan, but pro-business government watchdog agency with a 116-year history Monday backed Gov. Quinn's call for an increase in the state income tax as a way to address the "destructive budget crisis."

The Chicago-based Civic Federation issued "A Fiscal Rehabilitation Plan for the State of Illinois," calling for a series of pension reforms, budget rollbacks and increased taxes as a way to cut the estimated $12.8 billion state budget deficit by 84 percent by the end of the next fiscal year.

Yet, experts say the 100-plus-page report may be a nonstarter on arrival. The General Assembly is not likely to raise taxes in an election year, even though Gov. Quinn is expected to revisit a proposed income-tax increase when he presents his 2011 budget next month, and unions have resisted proposals to increase employee contributions to their pension plans and create a two-tiered system with reduced benefits for new state employees in the future.

Given the Civic Federation's history, however, the most eye-opening proposal was to increase the individual income tax from 3 to 5 percent and the business income tax from 4.8 to 6.4 percent.

"The Civic Federation does not enjoy advocating a significant tax increase in the middle of a difficult recession," said President Laurence Msall. "However, continuing to do nothing would be by far a worse option."

Kelly Kraft, director of communications for the governor's Office of Management and Budget, called the Civic Federation report "a positive step forward in the ongoing dialogue necessary to address our state's fiscal crisis."

The rehab plan also proposed rolling state spending back to 2007 budget levels, except in Medicaid and education, where the state is getting federal matching funds. It also suggested tacking another dollar-a-pack tax onto cigarettes.

The report spread blame for the budget crisis across many agencies and institutions.

"Illinois' fiscal crisis has been many years in the making," Msall said. "It was caused by more than 30 years of pension underfunding and many years of spending unfettered by the state's shrinking revenue sources."

Kraft said the OMB would be posting tentative 2011 budget figures online on Wednesday in order to "solicit online feedback from Illinois residents," adding, "The Quinn administration is eager to hear from everyday people and get their views on the state budget."