Illinois Taxes Rising; Wisconsin Hopes To Benefit

Illinois Gov. Pat Quinn speaks with reporters in his office at the capitol in Springfield. i i

Illinois Gov. Pat Quinn speaks with reporters in his office at the capitol in Springfield. Quinn defended a massive increase in state income taxes passed by lawmakers. Seth Perlman/AP hide caption

itoggle caption Seth Perlman/AP
Illinois Gov. Pat Quinn speaks with reporters in his office at the capitol in Springfield.

Illinois Gov. Pat Quinn speaks with reporters in his office at the capitol in Springfield. Quinn defended a massive increase in state income taxes passed by lawmakers.

Seth Perlman/AP

Illinois lawmakers voted to raise the state's income tax almost 67 percent to help cut an estimated $15 billion budget deficit. Critics worry that the increase will send businesses fleeing, but Gov. Pat Quinn supports the move and promises to sign the measure.

That's because Illinois is a fiscal mess. The state is months behind in paying its bills, and it's not just vendors and social service agencies waiting to be paid, but schools and local governments, too.

The state has been borrowing so much and racking up such a huge debt that its credit rating is now tied with California as the lowest in the country.

Calling his state a fiscal house on fire, Quinn said in order to keep Illinois from becoming "a fiscal basket case," the state's residents and businesses need to pay higher taxes.

So in the waning moments of a lame-duck session early Wednesday, with no Republican support and not a single vote to spare, Illinois' lawmakers voted to raise the state's personal income tax rate from 3 percent to 5 percent; and the corporate tax from 4.8 to 7 percent — all for four years.

"The concept here is this is a temporary income tax to deal with the immediate fiscal emergency our state faces," Quinn said.

The income tax increase is expected to raise close to $7 billion a year, and the legislation caps some state spending. But the new revenue alone won't close Illinois' gaping budget hole, and state Republicans blast majority Democrats for not doing more to cut spending.

In the heated floor debate, Republican state Sen. Kyle McCarter said the tax hike will kill jobs and cripple businesses in Illinois — with one exception.

"Here's an investment tip for you: Put your money in moving vans. They'll be in high demand," he said.

New Wisconsin Gov. Scott Walker wants to revive that state's old tourism campaign, "Escape to Wisconsin," but instead of encouraging neighboring Illinois residents to come up for weekend getaways, he's targeting businesses that want to escape the big tax increase.

"Lots of luck to them," said the Illinois governor, "but that's not going to happen." Quinn noted that Wisconsin tax rates are still higher than those of his state.

But that doesn't make this whopping tax increase of almost 67 percent any easier for Illinois residents to swallow, even among those waiting in line to meet Quinn at an open house at the governor's mansion after his inauguration earlier this week.

"I think there's a lot that needs to be cleaned up first, then we can talk about raising the income tax," said Anita Strautmanis of the Chicago suburb of Deerfield. She wants to see spending cuts and fixes for the state's pension problems.

As for this tax increase being temporary? "Um, I don't believe that. Once you raise something, it doesn't go down," she said.

But others are willing to pay more to end Illinois' perennial budget crises, including Southern Illinoisian Billie Henderson.

"I think that would generate a lot of revenue for Illinois. And I think, you know, we've been in trouble for so long, I think it's our responsibility to help get the state back on its feet," she said.

Illinois' income tax increase is retroactive to January first, so by the time the governor signs it and the revenue department begins collecting, that first paycheck deduction could be quite large.

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