Rauner promises to veto income tax hike

The Illinois House on Sunday passed a $5 billion income tax bill, as well as a spending plan, aimed at ending the state's three-year budget stalemate.

The revenue bill, which includes a 32 percent increase of the personal income tax rate, received a 72-45 vote; it needed 71 to pass. Lawmakers later voted 81-34 to approve a roughly $36 billion spending plan.

Chicago Democratic House Speaker Michael Madigan said the balanced budget offers a compromise that cuts billions of dollars while also providing new revenue. But Gov. Bruce Rauner pledged to veto the permanent tax hike, saying the bill lacks reforms to grow the economy, create jobs and provide property tax relief.

“Illinois families don't deserve to have more of the hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs,” Rauner said in a statement issued shortly after the vote. “Illinois families deserve more jobs, property tax relief and term limits. But tonight they got more of the same.”

The state entered its third straight fiscal year Saturday without a budget plan. It's the longest of any state since the Great Depression and comes with a $6.2 billion deficit and $14.7 billion in past-due bills.

The revenue bill, which was earlier negotiated in the Senate, includes an increase in the personal tax rate from 3.75 percent to 4.95 percent, as well as a corporate tax rate hike from 5.25 percent to 7 percent. It would raise about $5 billion.

Rep. Greg Harris, the Democrats' budget negotiator, said the measures reflect a reduction in spending and could prevent Illinois' credit rating from being downgraded to “junk” status, as promised by major credit agencies if the state didn't have a deal by the new fiscal year. The revenue bill will also fund bonds that would begin paying off a backlog of bills, he said.

Republican Rep. David McSweeney of Barrington Hills urged his fellow lawmakers to deny the revenue bill, saying the tax hike would hurt constituents and small businesses.

“They're all going to get screwed again by (former Gov.) Pat Quinn's budget. This is Pat Quinn's budget all over again,” he said. “Let's do the right thing for once. Let's stand up for the taxpayers.”

Republican Tom Morrison of Palatine said the income tax increase could stunt economic growth, resulting in a loss of jobs and causing residents to leave the state.

“We all know people need taxes. We all know we need a certain level of government,” he said. “But the question is, what can we afford? What can our constituents afford? What can job creators afford?”

But Rep. David Harris, an Arlington Heights Republican, said the tax increase, though unwelcome, would finance a proposed expenditure plan that could bring the budget impasse to an end.

“It's time to stop playing chicken with the fifth largest state in the union,” he said. “I was not elected as a state legislator to preside over the financial destruction of this great state.”

House Speaker Michael Madigan issued a statement Sunday night saying Democrats and Republicans “stood together” to pass the tax hike and spending plan.

“While none could say this was an easy decision, it was the right decision; it's clear that a budget package that cuts billions of dollars in state spending and also provides new revenue is the only path forward,” the Chicago Democrat said.

• The Associated Press contributed to this report.

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