Quinn using tax breaks to soften increase

SPRINGFIELD -- Gov. Pat Quinn wants to raise the state income tax to help plug an $11.5 billion budge deficit, but he hopes to soothe some of the sting with tax breaks.

Quinn has proposed a back-to-school state sales tax holiday to give parents a reprieve and he wants to triple the personal exemption so people can shield more income from being taxed.

The head of the Illinois Retail Merchants Association blasted Quinn's plan for a tax holiday that he says comes at the expense of retailers who are already suffering in a lousy economy.

"One only has to read the newspapers to know that the retail industry is not getting rich, just read the closures, just read the bankruptcy filings, just read the number of people who are getting laid off," said Dave Vite, the group's president.

Quinn wants to recoup the cost of the $40 to $50 million tax holiday by lowering the portion of sales tax retailers get to keep in exchange for collecting the tax for the state.

Quinn's proposed state sales tax holiday would be 10 days in August on clothing and footwear valued at $100 or less and school supplies.

"It's one more way to help parents raising children," Quinn said Tuesday after briefing lawmakers in advance of his Wednesday budget address.

Illinois' new governor is counting on a larger personal exemption -- boosting it to $6,000 from $2,000 -- to take the bite out of his income tax increase. Quinn has proposed a 50 percent increase in the personal income tax rate to 4.5 percent from the current 3 percent.

For example, the Quinn administration says a family of four making $45,000 would pay state income taxes of $783 under his plan compared to $1,002 under the current rate with its stingier personal exemption.

An increased personal exemption benefits people with lower incomes and more dependent children the most. People who make more money, are single or have few, or no, children won't fare as well, said Josh Barro, staff economist at the Washington-based Tax Foundation.

"This is a tax increase on lots of middle class families in Illinois, Barro said.