Illinois budget crisis fuels demand for progressive income tax

News Analysis

By John Bachtell
Chicago – As Illinois entered it’s 2nd week without a budget, Gov. Pat Quinn vetoed the state operating budget passed by the state legislature, sending the budget process into further chaos. The Democratic governor and Democratic controlled state legislature are wrestling with a $7 to $9.2 billion deficit (depending on whose counting) if no new revenues are forthcoming.

Quinn also began imposing cuts by announcing layoffs of 2,600 state workers and asked for an additional 12 unpaid days for the other 56,000 state workers. He threatened to layoff another 2500 workers if this wasn’t agreed to. Quinn outlined $1 billion in cuts to social service programs he want the state legislature to consider that will impact tens of thousands of people. Cuts will be heaviest in the department of Human Services and Corrections.

The Illinois budget crisis is mirrored across the country where at least 9 other states are without budgets in place as the new fiscal year begins. The crisis has been made worse since the US Congress stripped substantial aid to the states out of the American Recovery and Reinvestment Act, the first economic stimulus package. Calls are growing for a second stimulus that would include massive jobs creation and aid to the cash strapped states.

Calls for a tax increase as the only way to solve the budget crisis have not yet resonated widely enough because the progressive tax message has been muddled. Meanwhile, a labor leader said a bill passed by the State Senate would serve as a model for raising taxes fairly to overcome the budget crisis.

AFSCME Council 31 spokesperson Anders Lindall said, “There is a solution. It happens to be the best solution, the right solution, and the one with the most political support. House Bill 174, sponsored by Sen. James Meeks, has passed the Senate; it has passed a House committee. The governor has previously indicated support for it. It would raise enough revenue to prevent these kind of cuts.”

According to William McNary, co-director of Citizen Action/Illinois, HB174 should "serve as a blueprint to avert budget disaster."

Both chambers of the state legislature passed a budget, but Quinn previously vetoed the social service funding portion of it because it didn’t provide enough financing. Lawmakers aren’t scheduled to return to Springfield for a special session until July 14 when the next paychecks of state employees must be issued.

Conservative Republicans and business interests have been pressuring Quinn to cut state funding, including state pensions, in order to gain their support. Republicans have enhanced power since a super majority is now needed to pass any budget. Quinn has made concessions including lowering the tax increase proposal and calling for budget cuts.

Calls for budget cuts ignore the growing demand for public services especially in the current economic crisis and that funding over the years has not kept pace with inflation.

Many Democrats are fearful of pushing any kind of tax increase (whether progressive or not) with legislative elections looming next year. HB 174 passed the Senate and a House committee but has been blocked from coming before the full House by Speaker Michael Madigan.

Demonstrations have taken place across the state over the last few weeks against the cuts and for a progressive tax increase to solve the budget crisis. Supporters of HB 174 point out it raises approximately $7 billion in new revenues while modernizing the state’s tax system and making it fairer, by increasing the corporate income tax rate from 4.8% to 5% and personal income tax fro m 3 to 5%.

One way to make a more progressive tax structure aside from amending the state constitution is to sharply increase the Earned Income Tax Credit (EITC). HR 174 triples the EITC, cutting taxes to low income, working families and doubles the state income tax credit Illinois homeowners receive for property taxes paid on their principal residence.

HB 174 also takes a step in overcoming inequality in the funding of school districts across the state.

It’s going to take a great deal more political pressure to get HB 174 passed in the House and take an important step toward a more progressive tax structure in Illinois.