 Less than 24 hours after the Illinois Legislature approved $350
million worth of tax breaks for businesses and low-income earners,
some lawmakers want to roll back the corporate tax to 4.8 percent,
faster than outlined in the temporary income tax increase
legislation passed in January.House Republicans and Democrats say
they want to decrease the tax to keep or lure businesses in
Illinois, so they will create jobs in a state with more than 10
percent unemployment statewide.
"The approach we have with respect to taxes on businesses is not
working," state Rep. Tom Cross, R-Oswego, said at a Wednesday news
conference.
But the personal income tax will remain at 5 percent, 67 percent
higher than the original 3 percent before the January hike, until it
expires in 2014 or legislators take action in the upcoming session
to spread that tax relief to the individual taxpayers.
State Rep. Jerry Costello II, D-Smithon, the main sponsor of the
Democratic proposal, said repealing the corporate income tax
increase sooner is extremely important.
"It's not a Republican problem. It's not a Democrat problem. It's
an Illinois problem. We've got to find a way to not only keep
companies in the state of Illinois, but we've got to find a way to
attract new companies," Costello said.
The Democratic legislation, with at least seven Democratic
supporters, would restore the corporate rate to its pre-tax hike
rate of 4.8 percent starting next year. That would cost the state
$5.6 billion in uncollected tax revenue.
The GOP's plan is less aggressive. It would drop the corporate
rate from 7 percent to 6 percent, a 14 percent decrease, starting
Jan. 1, 2013. On Jan. 1, 2014, the rate would return to 4.8 percent,
an additional 20 percent reduction.
All told, the GOP legislation would cost the state about $4.8
billion in revenue.
Additionally, anytime the unemployment rate goes up by more than
0.3 percent during a four-month period, the corporate income tax
would drop by 0.25 percent, though it never would fall below the 4.8
percent mark.
Costello and Cross indicated they'd be willing to work with each
other on some rollback of the corporate income tax rate.
Illinois raised its corporate and individual income taxes in
January to deal with a deficit approaching $15 billion.
The tax hike boosted state revenue by $1.3 billion to $1.8
billion. Even with this additional money, the state still faces
overdue bills of $5 billion and a pension payment that is $1 billion
more than what the state paid this year.
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"We were very cognizant that we have a problem with our budget,
and that's why we drafted it in the way we did," Cross said.
He said the state could make up for the lost revenue from the
decreased corporate income tax by tightening the eligibility
requirements for Medicaid and changing the state employee retirees'
health care plans. Details about changing these programs were not
laid out yet.
Representatives of the business community said any broad-based
tax relief is welcome.
"The Illinois Chamber (of Commerce) is encouraged by legislative
initiative that recognizes the importance of demonstrating to
employers and investors that Illinois governments are conscious of
the need to improve the state's business climate by reversing course
on the job-killing tax increase," said Doug Whitley, president of
the Illinois Chamber of Commerce, the largest business organization
in the state.
Creating a more business-friendly environment means more jobs,
Cross said. Illinois' unemployment rate for October, the most recent
data available, was 10.1 percent. Nationally, the unemployment rate
for October was 9 percent.
"We need to provide jobs, and that's the compassionate approach.
If someone has a job, they can pay their mortgage, they can buy a
car, they can buy food, they can send their kids to college. Right
now, (with) unemployment a little over 10 percent, that's not
happening for a lot of people," Cross said.
But small- and medium-sized businesses that don't file with the
state as corporations pay the same individual income tax rate that
households do.
Kim Clarke Maisch, the Illinois director for the National
Federation of Independent Businesses, which advocates for small- and
medium-sized businesses, said some form of tax relief for those
paying the individual income tax is necessary.
Costello said that reform would follow any change in the
corporate income tax.
"That's something that we'll be looking at in the future. I can't
commit to that one way or the other, but (corporate income tax
relief) is the first step in an overall process," he said.
[Illinois
Statehouse News; By ANDREW THOMASON] |
