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State income taxes: Pat Quinn downplays proposed increase: Governor: This would provide relief to millions
[March 14, 2009]

State income taxes: Pat Quinn downplays proposed increase: Governor: This would provide relief to millions

(Chicago Tribune Via Acquire Media NewsEdge) Mar. 14--Gov. Pat Quinn acknowledged Friday he will seek an increase in the Illinois income tax when he proposes his budget Wednesday, but sought to downplay the tax hike by labeling it "fundamental tax reform" that would lessen the blow on lower-income families.

The Tribune disclosed in Friday's editions that Quinn was considering increasing personal income taxes by 50 percent, boosting the rate from 3 percent to 4.5 percent, while also looking to increase the personal tax exemption, currently at $2,000, to as high as $6,000.

"There will be some that will have a higher tax burden," Quinn said during a hastily called news conference at the Thompson Center in downtown Chicago.

Quinn, who has sought to withhold details of his budget plan until next week's speech, would not discuss his proposed tax hike except to say that for many taxpayers a significant increase in the personal exemption would more than offset the income tax increase he is seeking.

"If you have a generous personal exemption, you can reduce taxes, cut taxes, on millions and millions of people in Illinois -- millions of people who right now are suffering in a very, very difficult economic time, a recession that's probably the worst in our lifetime," Quinn said.

Administration officials painted an increasingly bleak picture of the state's financial situation as they worked to finalize details of the governor's plan. They said the budget deficit could reach more than $11 billion by July 2010, $2 billion more than recent estimates, if nothing is done. They also said state revenue from income and sales taxes is expected to be down a combined $1.8 billion from the previous budget year.

Jerry Stermer, the governor's chief of staff, said Quinn is also planning $850 million in new cuts to existing programs but did not provide details. In recent weeks, Quinn has touted the issue of tax "fairness" in laying the political groundwork for a proposal to increase income taxes.

The Democratic governor, who succeeded the ousted Rod Blagojevich, said families of four who earn about $56,000 to $57,000 a year would see no increase in their income tax burden. Those who earn substantially less would see a tax cut because of the larger personal exemption while those who earn more would see an increase, he said.

"This is a once in a lifetime chance for the people of Illinois, the hardworking taxpayers of Illinois, to get tax reform that produces tax relief for millions and millions of people," Quinn said. "I'm going to fight as hard for this principle as I can." That fight may already be under way on a variety of fronts. Republicans and even some Democrats have opposed seeking an income tax increase in light of the state's poor economic climate. And Quinn may have strengthened GOP opposition by also vowing to close unspecified corporate tax "loopholes" to raise revenue -- an effort that his predecessor frequently sought from lawmakers and failed to achieve.

Even without Quinn revealing much about his plans, Republican lawmakers in the General Assembly were poised to oppose an income-tax increase, contending Democrats who controlled the governor's office and the legislature helped create the fiscal mess.

"I think it's pretty much a long shot," said House Minority Leader Tom Cross (R-Oswego). "The inclination is going to be to resist it." Under a proposal in which the state income tax increases to 4.5 percent but the personal exemption goes up to $6,000, a family of four that makes $100,000 a year would pay the state an additional $660 in income taxes -- or nearly 25 percent more.

The break-even line under the plan for a family of four would be one that earns $56,000 annually. Any family of four making more would pay the state more, while any family making less than $56,000 would see their income taxes to the state decrease. Those figures are based on an adjusted gross income and don't include other tax credits or deductions.

Quinn said he would fight efforts by some Democrats to seek an increase in the state's 19-cent-per-gallon gasoline tax, which some legislators have pushed as a way to pay for a massive job-creating public works construction program.

"We're not going to raise the gas tax," Quinn said. "I don't think we should raise it." Quinn favors a $25 billion public works program but has not specified how he would pay for it. One key source said Quinn is looking at tying a portion of the income tax proceeds to the construction plan. But in a sign of how fluid the budget plans may be, Quinn signaled another possibility. When asked if he would support increases in license plate and driver's license fees, Quinn said, "We're going to talk about a capital [public works] plan and you'll get a lot of details about that." Stermer later acknowledged the administration "might look at something like" increases in driver's license and vehicle fees without saying how the new revenue might be used.

The governor, whose push for higher taxes could become a political liability if he seeks election to the job in 2010, said the public needs to realize that Illinois "has a mountain of debt" that he inherited from Blagojevich.

"We're going to pay our debt off," Quinn said.

Blagojevich, who was impeached and removed from office in January, was unavailable for comment other than releasing a statement through the public relations firm representing him.

"This is exactly what I said was going to happen," Blagojevich said.

Tribune reporter Rick Pearson contributed to this report.

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