Illinois Taxes Rising; Wisconsin Hopes To Benefit The higher rates are aimed at closing a $15 billion deficit. Gov. Pat Quinn says he doesn't worry about businesses leaving for the neighboring state, because Wisconsin's rates are higher.
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Illinois Taxes Rising; Wisconsin Hopes To Benefit

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Illinois Taxes Rising; Wisconsin Hopes To Benefit

Illinois Taxes Rising; Wisconsin Hopes To Benefit

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STEVE INSKEEP, Host:

Now let's talk about the cold hard math of taxes.

Illinois lawmakers have voted to drastically increase the state's income tax. Supporters of the move say it's necessary to help produce the state's estimated $15 billion budget deficit, and Governor Pat Quinn has promised to sign it.

NPR's David Schaper reports.

DAVID SCHAPER: Illinois is a fiscal mess. The budget crisis here is considered the worst in the nation. The state is months behind in paying its bills, and it's not just venders and social service agencies waiting to be paid, but schools and local governments too.

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

Calling his state a fiscal house on fire, Democratic Governor Pat Quinn says in order to keep Illinois from becoming fiscally insolvent, the state's residents and businesses need to pay higher taxes.

PAT QUINN: It's important for the state government not to be a fiscal basket case.

SCHAPER: So in the waning moments of a lame duck session early Wednesday, with Quinn's backing but no Republican support and not a single vote to spare, Illinois lawmakers voted to raise the state's personal income tax rate from three percent to five and the corporate tax from 4.8 percent to seven.

QUINN: The concept here is this is a temporary income tax to deal with the immediate fiscal emergency our state faces.

SCHAPER: The income tax increase would raise close to $7 billion a year, and it caps some state spending. But the new revenue alone won't close Illinois' gaping budget hole, and Illinois Republicans blast majority Democrats for not including significant spending cuts.

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

KYLE MCCARTER: Here's an investment tip for you: Put your money in moving vans. It'll be in high demand.

SCHAPER: Already the Republican governors of Wisconsin and Indiana are using Illinois' tax increase as a marketing tool to try to lure Illinois businesses across the border.

QUINN: Well, lots of luck to them, but that's not going to happen.

SCHAPER: An unconcerned Illinois Governor Quinn points out that Wisconsin's income tax rates remains much higher than Illinois'. 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 Governor Quinn at an open house at the governor's mansion after his inauguration earlier this week.

ANITA STRAUTMANIS: I think there's a lot that needs to be cleaned up first. Then we should talk about raising the, you know, raising the income tax.

SCHAPER: Anita Strautmanis of the Chicago suburb of Deerfield wants to see spending cuts and fixes for the state's pension problems. And as for this tax increase being temporary...

STRAUTMANIS: I don't believe that. Once you raise something, it doesn't go down.

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

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.

SCHAPER: Illinois' income tax increase is retroactive to January 1st, meaning by the time the governor signs it and the revenue department begins collecting, that first paycheck deduction could be quite large.

David Schaper, NPR News, in Springfield, Illinois.

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