Illinois Democrats Seek Tax Hikes to Offset Rauner's Budget Cuts
By Monique Garcia and Kim Geiger and Jessie Hellmann
Republican Gov. Bruce Rauner's opposition to raising the income tax and proposal to slash the state budget have Democratic lawmakers pushing more than a dozen other tax hikes as they try to bring in more money to save social service programs that are on the chopping block.
Many of the ideas have come up before but failed to gain traction at the Capitol, from taxing sugary drinks and satellite television service to increasing income taxes on the wealthy to eliminating tax breaks for corporations. Given the political environment, the annual push to expand gambling and bring a casino to Chicago got an earlier-than-usual start this session.
While none of the revenue-raising ideas would generate enough money to fill what Rauner has said is a $7 billion shortfall, the smorgasbord of proposals offers Democrats an array of options to try to counter some of the deep cuts Rauner says are necessary to bring the state out of the red.
Even some Republicans are searching for a way to limit the pain, suggesting that fireworks should be legalized and taxed and that the state should do away with the requirement that local governments publish public notices in newspapers to save money.
But it's the Democrats who control the General Assembly who are facing particular pressure in the battle over the next state budget. The majority of Rauner's proposed cuts go after programs near and dear to Democrats, including arts programs, drug treatment and home care for the elderly. Lobbying groups are increasing the volume of their cries for help, saying Rauner's slash-and-burn approach would all but abandon some of the state's most vulnerable.
The problem facing Democrats is much of their own making. In 2011, they approved a 67 percent increase in the state income tax rate and set an expiration date of January 2015 for much of it. That allowed Democrats to label the tax increase as temporary and let the combatants for governor in 2014 debate whether it should be kept.
Candidate Rauner said the tax rate should be allowed to drop to 3.75 percent from 5 percent. Rauner defeated Democratic Gov. Pat Quinn, who wanted to keep the tax hike, and Democrats let the rate roll back, costing the state treasury an estimated $4 billion a year.
During the campaign, Rauner said he would be open to restoring parts of the income tax increase. The Republican's platform also called for expanding sales taxes to services such as laboratory testing and attorneys' fees, and for the elimination of several corporate tax breaks. Since taking over as governor, Rauner has gone silent on the possibility of those tax increases, saying there should be no discussion of asking taxpayers for more money without first overhauling how state government works and making huge spending reductions.
"I'll talk about anything with the legislature, but the key first is to get the structural reform," Rauner said last week during a stop in DeKalb.
Democrats aren't willing to wait to talk about ways to blunt the impact of possible cuts however.
"Creative lawmakers can come up with many options for new revenue," said Rep. Lou Lang, D-Skokie. "Let's remember that the governor proposes a budget, but we pass it."
Democratic House Speaker Michael Madigan has said the solution lies in a combination of budget cuts and more revenue. He's revived his call to amend the Illinois Constitution to tax millionaires an extra 3 percentage points, saying it could generate $1 billion a year for school funding. But even if the idea was supported by lawmakers, the question couldn't appear on the ballot for voters to ratify until 2016 -- meaning there would be no affect on the current budget deficit.
So Democrats are grappling with what blend of proposals would bring in money more quickly and be politically palatable enough for legislators to support. While Democrats hold veto-proof majorities in both chambers, there's little guarantee members of the party will stand united to push something through and then override a possible Rauner veto. Beyond that, in recent years Democratic leaders have sought Republican votes on more controversial proposals so that blame can be shared by both parties.
"We can't raise taxes unilaterally ... everything's going to have to be bipartisan," said Senate President John Cullerton, D-Chicago, after a speech Monday.
One option viewed as less onerous than a tax increase is an expansion of gambling that would bring a long-sought casino to Chicago.
Supporters point not only to the usual desperation to find money but also a changing of the guard in the governor's office. While Quinn cleared the way for video poker machines in taverns, truck stops and restaurants across the state, he also twice blocked bills that would have added more casinos and allowed horse tracks to install slot machines.
Rauner has said he's not a huge fan of gambling but hasn't publicly closed the door on a possible expansion -- and supporters are hopeful he'll seize on the idea as a way to raise money and create jobs without increasing taxes.
"We have a new governor, we have different dynamics," said Rep. Bob Rita, D-Blue Island.
Rita has introduced two proposals. One would create a state-owned casino only in Chicago and another would allow casinos in Chicago and four other areas -- the south suburbs and Lake, Vermilion and Winnebago counties -- to satisfy downstate and suburban lawmakers.
But even those who support gambling expansion say casinos aren't as profitable as they once were, and note the time it would take to get new ones running would do little to pad the state's bottom line now. They argue the quickest way to bring in money is by increasing taxes, even if there's little agreement on which ones to hike.
Tax breaks for corporations have been targeted for years in Springfield without much success, given the powerful business lobby and sensitivity to the state's lagging economy. Now Democrats are freshening their argument by suggesting the wealthy Rauner has preference to cut programs for the needy at the benefit of his business allies.
Sen. Toi Hutchinson, D-Olympia Fields, wants to eliminate a variety of so-called "loopholes" that reduce tax liabilities for a wide range of companies, including breaks for Illinois companies that shift their production activities out of state.
"This budget is being framed as essential spending versus non-essential spending, and if that's the case it needs to be applied across the board," Hutchinson said. "If we have to put a close eye on every dollar that goes to a child, then we ought to be doing the same thing on the other side of the ledger with corporate subsidies."
Business interests say removing tax breaks is tantamount to a tax hike. Still, there could be room for a deal on this front, as Rauner himself has called to get rid of some corporate tax breaks, including eliminating an exemption in state tax law that allows some businesses with multiple related entities from filing a single tax return.
Other Republicans argue the state should not be responsible for giving certain companies a leg up. Rep. Joe Sosnowski, R-Rockford, wants to eliminate a requirement that governments publish notices such as real estate assessments in the local newspaper. Sosnowski says newspapers are needlessly getting taxpayer dollars when such information could be published online for free. That proposal wouldn't help the state's bottom line, but could save money for at the city and county level.
Other tax proposals include:
--A 3.75 percent tax on guns and gun parts. It's an idea that will face tough opposition from gun rights groups, but sponsoring Rep. Rita Mayfield, D-Waukegan, said it's a source of money that's gone untapped for too long. "I looked at it like, if you buy a car whole, you pay taxes on it. If you buy parts to upgrade or fix your car, you're taxed on it," Mayfield said. "Guns and gun parts, they're not being taxed." Mayfield said she didn't know how much the tax would raise, "but if we can get a good million or so, I'll take it."
--Drinks sweetened with sugar, syrups or powders could be taxed at a rate of one cent per ounce under as plan backed by Sen. Mattie Hunter, D-Chicago. The money would be used for obesity prevention and the state's Medicaid health care program for the poor, which Rauner has targeted for a nearly $1.5 billion cut.
--Democratic Rep. Art Turner of Chicago wants to extend a tax on cable companies to satellite TV providers, saying the 5 percent charge would raise up to $110 million a year.
--Rep. Mary Flowers, D-Chicago, wants to tax financial transactions at Chicago-based exchanges and boards of trade, owned by CME Group Inc., the world's largest futures market operator. It's an idea backed by the Chicago Teachers Union.
--Rep. Christian Mitchell, D-Chicago, wants to amend the constitution to replace the state's flat income tax rate with a graduated rate based on income, an idea Rauner dismissed Friday, saying it "ain't the answer."
--Democrats aren't alone in searching for ways to bring in new money. Republican Sen. Chapin Rose of Mahomet is pushing legislation that would legalize and tax fireworks, saying Illinois is losing out to neighboring states.
But Rose frames the issue a bit differently from his Democratic counterparts, saying while it would help pad the state's coffers, it's mostly aimed at decreasing regulation.
"This is also about freedom to me," Rose said. "This is about stopping the nanny state. I mean, we have the state telling people 'no, no, no, no, no.' We could all maybe live in a bubble and maybe never get hurt, too, but what fun would that be?"
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