Sunday, January 20, 2013

Time for Quinn to act on Illinois' fiscal cliff (from the Editorial Board of the State Journal-Register)

The numbers in Gov. Pat Quinn’s three-year budget projection are stark and a reminder of Illinois’ own impending fiscal cliff, starting in 2015. The 2011 income tax increase that raised the individual rate from 3 percent to 5 percent expires at the end of 2014, which is midway through the 2015 fiscal year. That means the budget lawmakers are supposed to pass by June of this year, FY2014, will be the last containing a full year of the increased revenue.

The governor’s budget office projects that state sources of revenue (the corporate and individual income taxes, the sales taxes and other miscellaneous sources) will dip from $29 billion in FY2014, to $27 billion in FY2015 to $24.8 billion in FY2016. That means nearly $4 billion more in cuts at a time when health-care costs
and required pension payments continue to rise and education and health care have already been whacked.

There was chatter at the Statehouse that Quinn would nudge the legislature to make the income tax increase permanent during the recent lame-duck session, but such an effort didn’t materialize after Senate President John Cullerton iced the idea, saying whether to extend the increase is an issue for the 2014 election. It wouldn’t have to be if Quinn and the legislature decided to tackle reforming the state’s tax system before then.

Illinois’ tax structure is an archaic relic of the economy of 30 years ago. The state sales tax doesn’t tax the growing service sector. It doesn’t effectively tax online sales. Both the sales tax and our flat income tax disproportionately hit the poor and middle class. Two-thirds of the state’s corporations don’t pay the corporate income tax, partly because of special treatment afforded them in the tax code…

For his entire political career, Quinn has been for a progressive income tax, but in his four years as governor, he has never offered a serious proposal to institute one. His 2010 primary opponent, Dan Hynes, did offer a plan, one that would have spared 97 percent of taxpayers a tax increase, taxed some services and raised $5.5 billion in new revenue…

The governor should dust off Hynes’ plan and make it his own. He should urge legislative Democrats, who now have supermajorities in both chambers and can place a constitutional amendment on the ballot without Republican support, to flex their political muscles. Quinn ought to ask the legislature to send voters an amendment in 2014 that would allow for a progressive income tax and then run alongside it as a permanent budget fix. He ought to couple that with a comprehensive plan to reform the state’s tax structure from top to bottom…

The governor talks a lot about the need for bold solutions to problems. This is one. And it happens to be good politics, too.


from the State Journal-Register

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