State tax options debated at Naperville Chamber event

Some Naperville-area legislators are standing firm in their opposition to both a progressive income tax in Illinois and making permanent the 2011 income tax increases.

“I’m not going to support either,” State Sen. Michael Connelly (R-Naperville) said Monday.

Connelly spoke at the Naperville Area Chamber of Commerce’s Legislative Committee lunch after a presentation by the Chamber’s state representative and a spokesperson for the Taxpayer’s Federation of Illinois detailing the dire financial state of Illinois.

A change to a progressive tax requires amending the state constitution, and the movement to place a binding question on the November ballot would require a three-fifths majority in both houses of the General Assembly by May 4.

The proposition failed a committee vote in the House, but the Senate could still approve it and hand the matter back to the House.

Regarding the odds that the question could still wind up going to the voters, Connelly said, “I don’t think they’re very good.”

As for the extension of the 2011 tax hike Connelly said that a decision on that would probably no happen until after Jan. 1, 2015, when the increases are scheduled to expire.

While the issues have split the General Assembly along party lines, some Democrats are likely to stand with Connelly.

State Sen. Linda Holmes (D-Aurora) opposes the progressive tax and, like Connelly, doesn’t think the question will be put to the voters.

“It doesn’t look likely that the graduated tax (will be on the ballot),” she said. “The extension has a bigger chance.”

The 2011 increase was passed as a temporary measure to help the state catch up on backlogged payments and move toward fully funding its pension liabilities. But the 67 percent increase, from 3 percent to 5 percent for individuals and 7.3 to 9.5 for corporations, has not solved the pension problem.

Holmes made clear that, while she might support a gradual reduction of the 2011 increases, she was categorically opposed to an extension of the increases in perpetuity.

With state Rep. Stephanie Kifowit (D-Oswego) also on record a opposing the increases, Holmes isn’t the only Democrat willing to break ranks with the party.

Taxpayer Federation President Carol Portman spoke about the state’s finances, her figures presenting a grim scenario. The state’s backlog of unpaid bills stands at $5.4 billion, unemployment is at 8.7 precent, and almost half of all state schools are in deficit spending. That doesn’t even address the state’s unfunded pension liabilities, capital funding needs and education funding shortfalls.

Portman pointed out that the amount of revenue Illinois receives from the state income tax will fall from $16.3 million to $14.6 million if the 2011 increase expires on schedule.

“That’s a huge dropoff,” she said.

Portman talked about the General Assembly’s options, including extending the 2011 increase or enacting a progressive tax.

She noted that the Taxpayer’s Federation took no position on the progressive tax proposal, but didn’t completely reject the idea.

“You can do it in a way that’s not inconsistent with good tax policy,” she said.

The federation’s rough estimates show that if the tax increase expires and no other revenues are found, cuts will be made to state spending on Human Services ($719 million), K-12 education ($967 million), higher education ($248 million), and public safety ($303 million).

“That’s pretty scary,” she said.

But Connelly said that he is tired of the focus on revenue to the exclusion of spending reforms. He said the state had taken in an almost $30 billion in additional revenue since the tax increase went into effect.

“That’s a lot of money,” he said. “Do you think it was spent wisely?”