With Gov. Rod Blagojevich’s massive business tax plan probably dead, the most pressing financial question facing Illinois leaders as the new budget year approaches is: What now?
Opposition to Blagojevich’s proposed gross receipts tax brought a rare moment of unity last week in the Illinois House, where the measure didn’t get a single vote of support in a nonbinding resolution Thursday. But there is little consensus now on how — or whether — to raise billions of new dollars that many believe Illinois needs for increasing funding to schools, health care and other obligations.
“We have three weeks to get together, to pass a budget, to do for the people of Illinois the (things) that we have all talked about in campaigns,” Rep. Jay Hoffman, D-Collinsville, a top Blagojevich ally, warned his fellow lawmakers in floor debate last week. “Do we want to provide affordable access to health care to the people of Illinois? Do we want to provide quality education?”
With the July 1 start of the fiscal year on the horizon, and a $50 billion-plus spending plan needed to run the government, those questions will occupy legislators until their scheduled summer adjournment May 31, and perhaps beyond it.
House Speaker Michael Madigan, D-Chicago, will meet with his caucus Tuesday to ask what new taxes — if any — members would support in lieu of Blagojevich’s plan.
Among the potential options:
— A general income tax increase. Illinois residents now pay a 3 percent flat tax on their income, while corporations are taxed at a 4.8 percent rate. For years, some have suggested raising the income tax, while simultaneously lowering local property taxes.
The idea of such a “tax swap” would be to shift the primary burden for school funding onto the state, where the Illinois constitution says it’s supposed to be, and away from local property taxes, which is where it has long been. Proponents say the change would even out school funding disparities while providing more money for schools.
That principle is behind pending legislation (HB750 and SB750) that would raise the state’s personal income tax to 5 percent from 3 percent; raise the corporate income tax to 8 percent from 4.8 percent; and return some of that money to residents in the form of property tax rebates.
The major obstacle to the idea is Blagojevich, who won re-election last year on a vow not to raise the personal income tax or general sales tax under any circumstances. Blagojevich bluntly reiterated that vow in his testimony before the House last week.
“If you pass it, I will veto it,” Blagojevich said.
To override a gubernatorial veto takes a three-fifths vote of the House and Senate — a difficult task in most circumstances, and likely to be impossible on something as fundamentally controversial as an income tax increase.
“Unless we have 71 votes in this House to raise the income tax, why are we talking about it?” Hoffman, the Collinsville Democrat, asked colleagues last week.
— A “maintenance budget.” This is jargon for keeping the status quo: no new programs, no new taxes and no tax increases. Although lawmakers in both parties say they’d like more education and health care funding, there has been increasing sentiment lately that, amid the rubble of competing new tax plans, maybe it would be best to keep the status quo.
“It’s a mistake to accept the premise that we need to raise $7.5 or $8 billion” in new revenue, House Minority Leader Tom Cross, R-Oswego, said in floor debate Thursday, referring to the amount of money Blagojevich’s proposed gross revenue tax would have raised. “That means we grow our budget by 30 percent. Nobody raises their budget by 30 percent.”
But Blagojevich, testifying before the House on Wednesday, spoke forcefully against a no-growth budget. He said the need to boost education and health care funding was too great, and he warned that, given rising expenses, the state would have to trim $1 billion in services if there wasn’t new revenue.
Blagojevich cited examples that some later questioned.
“Hot meals for senior citizens in Carbondale will have to be cut if we have a zero-growth, do-nothing budget,” Blagojevich said. “We will hurt people. Schoolteachers will have to be laid off. … New textbooks won’t come because school districts won’t have the money they need. … Football teams might not have uniforms at their high school football games.”
As lawmakers groaned and guffawed, Blagojevich pressed on: “I believe in high school football. I’d like to see those kids have those uniforms.”
Cross, the Republican leader, later quipped to reporters: “I’m a little worried about the football players without uniforms. I’m trying to envision going to our high school football games this fall and (the team) only having, like, pads on.”
— Gambling expansion. Illinois’ nine casino riverboats bring in about $800 million a year to the state in gambling taxes. There is an almost perennial debate in Springfield about expanding the gambling industry to increase the state’s take.
That idea has been more heavily discussed in the past week, as it became clear that Blagojevich’s business tax plan was sinking. One bill that had appeared dead just a few weeks ago but now may get a second look (HB480) would allow four new casinos to open in Chicago and would allow slot machines at Fairmount Park and other horse tracks.
“Every time they’re looking for money, they look at gambling,” lamented Anita Bedell, director of Illinois Church Action on Alcohol Problems, which lobbies against gambling expansion. “It’s such an unstable source of revenue … , but it’s what they keep coming back to.”
— Other tax increases. Increasing the general state sales tax would offer the most potential new money. But the idea faces the same obstacle as an income tax boost: Blagojevich has a standing vow not to allow it.
The state has an array of smaller fees and taxes — on businesses, on state services, on licensed activities, on alcohol and cigarettes — and Blagojevich has indicated in past years that he doesn’t view his “no tax hike” pledge as applying to those taxes.
However, many of those taxes and fees already have been increased under Blagojevich to fund previous state budgets, leaving less room for raising such taxes now.
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