What else did people really expect to happen?
In 2011, Illinois passed a temporary income tax hike, without any reform. Despite $32 BILLION in extra revenue, the state’s unpaid bill backlog only declined by $1.3 billion (to $6.6 billion from $7.9 billion), and pension debt rose by $25 billion.
Spending and pensions are a MAJOR problem in Illinois. Dem. House Speaker Mike Madigan has been in control of Illinois for over 3 decades. Illinois has had at least 3 governors go to jail. They’ve also had at least 3 years of no budget in place. In other words, in Illinois corruption and spending are not new in politics. Without pension reform, Illinois taxpayers will continue to be screwed.
H/T Zero Hedge:
With Illinois, which on Saturday morning entered its third fiscal year without a budget, facing a catastrophic downgrade, late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse. The bill passed 72-45. The House also approved a $36 billion spending plan minutes later on a 81-34 vote. According to the Sun Times, it cleared an initial hurdle on Friday with 23 Republicans voting “yes.”
“While no one could say this was an easy decision, it was the right decision,” House Speaker Mike Madigan said after the spending bill vote. “There is more work to be done.” Dems said they would work with Republicans on other resolution of other issues on table.
The proposed tax increase will now head back to the Illinois Senate, which approved a revenue bill on May 23 with all Democratic votes as part of its “grand bargain” package. But Governor Bruce Rauner has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions.
Commenting on the just passed House bill, Rauner said he’ll veto the revenue bill.
“I will veto Mike Madigan’s permanent 32% tax hike. Illinois families don’t deserve to have more of the hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs,” Rauner said.
“Illinois families deserve more jobs, property tax relief and term limits. But tonight they got more of the same.” He also said in an emailed statement that “if the legislature is willing to pass the largest tax hike in state history with no reforms, then we must engage citizens and redouble our efforts to change the state.”
Some commentators promptly countered that Rauner’s veto will likely be overriden.
The tax bill passed with some essential Republican support: it needed 71 votes. But Illinois House Republican Leader Jim Durkin questioned how it will address the state’s $14 billion backlog. Durkin is seeking to get Rauner the “balanced budget package,” he wants, which includes spending reductions and “meaningful reforms.”
There are, of course, political ramifications to supporting a tax hike, on both sides of the aisle. Some House Democrats were expected to vote no to try to shield themselves from Illinois Republican Party attacks in next year’s election. But some House Republicans, knowing they’d too be targeted for supporting it. said there’s no other choice.
Others were even more fatalistic: “If I lose my seat so be it,” state Rep. Michael Unes, R-Pekin said, adding the state shouldn’t have gotten so close to a financial collapse. “Without this, we will lose thousands of lives and thousands of jobs and the alternative is so much worse. I don’t like this. This is not easy. This is really, really difficult,” Unes said. “But the alternative is much worse than this. The alternative is literally taking our state off the cliff.”
David Harris was among the Republicans who supported the bill, while also urging the governor to sign the revenue and spending bills if passed: “Have the courage to do what is right and bring this madness to an end.”
“I was not elected as a state legislator to help preside over the financial destruction of this great state,” Harris said. “I respect my colleagues who are voting no. But to me, enough is enough.”
Meanwhile, changes made by House Democrats from the original Senate bill include the removal of streaming and satellite fees. It also closed corporate tax loopholes, increased the earned income tax credit, and restored the research and development and manufacturers’ tax credit to attract more businesses.
It is unclear if the passed tax increase will be sufficient to placate S&P. Recall July 1 was the date when the credit agencies said they would drop the state to “junk” status without a budget. Ultimately, the fate of Illinois’ credit rating is now in the hands of Rauner, and whether and how fast his imminent veto is overriden.
However, Rauner has announced he will veto the budget in its current form.
Lawmakers could override the governor’s veto with a three-fifths majority vote in each of the House and Senate, which is currently the same share it takes to send the budget to the governor’s desk in the first place.
The spending bill has also been described as “booby trapped” in that it blocks money for schools unless Gov. Bruce Rauner signs an evidence-based school funding bill into law. This inaptly named education funding model has been a failure in every state in which it has been adopted.
Illinois is in between a rock and a hard place. This is not a budget crisis, but a financial crisis that has been going on for quite some time, as long as Speaker Madigan has been in power. Illinois hasn’t had a balanced budget since 2001; that’s 16 years!
Basically, Illinois is one state where Democrats think TAXES are the solution to everything! Total INSANITY!
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