From AP - News Headlines -

Illinois Senate Leader: Tax Deal Reached

Top Illinois Democrats have agreed to push a plan that would temporarily boost income taxes by 75 percent and double cigarette taxes, Senate President John Cullerton said Thursday.

Illinois' personal income tax rate, now 3 percent, would climb to 5.25 percent for four years under the plan Cullerton outlined. After that, it would drop to 3.75 percent.

That means someone who now owes $1,000 in state income taxes would owe $1,750 at the new rate, then $1,250 after four years.

The permanent portion would be used several ways. Some would be devoted to schools and some to repaying an $8.5 billion loan that would be used to pay overdue bills, Cullerton said.

Another chunk would go to property tax relief in the form of annual $325 checks, he said. The checks would replace the property tax exemption that homeowners can now claim on their income taxes.

Cullerton said House Speaker Michael Madigan and Gov. Pat Quinn fully support the tax proposal, although Quinn once promised to veto any increase of that size.

Madigan's spokesman said he couldn't discuss the speaker's position. The Senate has approved tax increases in the past, so the biggest question about this proposal is whether Madigan can find enough votes to get it through the House.

The governor's office put out a statement that stopped short of saying the three leaders had reached a final agreement. Rank-and-file legislators said Quinn described the tax plan to them earlier in the day and portrayed it as a deal among all three of the powerful Democrats.

Democrats say they have no choice but to raise taxes as one part of a solution to Illinois' massive budget crisis. The state deficit could reach $15 billion in the coming year. The government is borrowing money to cover some obligations, letting bills go unpaid for months and cutting corners everywhere from state prisons to state parks.

"We are in desperate need," Cullerton said at a news conference in his office.

Cullerton said the higher taxes would generate about $7.5 billion a year during the four years they're at their highest.

The tax on cigarettes, now 98 cents a pack, would jump to $1.98, Cullerton said. The money would be earmarked for education.

Quinn, Cullerton and Madigan want to pass something before the current General Assembly formally ends Jan. 12. After that, they lose some of their Democratic majority as well as outgoing legislators who might be persuaded to support a tax increase as they leave office.

Madigan has repeatedly said he doubts that a tax increase could pass in the House without Republican support. But Republican leaders have not been included in tax and budget negotiations, and there was no indication Thursday that they were prepared to cooperate with the Democrats.

"If they think this is a solution, they should go ahead and put their own votes on it," said Senate Minority Leader Christine Radogno, R-Lemont.

Cullerton emphasized that taxes would be just one part of the solution.

Quinn and the Legislature already have cut spending significantly. They've also reduced pension benefits for future state employees and passed a plan to help limit the cost of providing health care to the poor.

Cullerton said there also will be a moratorium on new programs and spending growth would be held to 1 percent a year.

"We are not doing a short-term fix," he said.

The tax proposal puts Quinn in an awkward position. It would boost the tax rate by 2.25 percentage points, but the governor promised last year to veto any increase above 1 percentage point.

Last summer, a Quinn aide suggested taxes might have to be raised by 2 points. Quinn quickly disavowed the comments and said he opposed anything beyond his proposed hike of 1 percentage point.

"I'm going to veto anything that isn't my plan," Quinn said at the time.

Quinn's office didn't comment Thursday on the conflict between the tax plan and his campaign promise.

Radogno said it would be "dishonest" for Quinn to approve it after promising a veto.

"To me, that's kind of a bait and switch," she said.

Categories: Economics, Government, Politics