Illinois' tax increase vote in January dominated this year's
Illinois Statehouse News takes a look back at
the year, taking stock of the work from state lawmakers. The year in
review looks at the abolition of the death penalty, workers'
compensation reform, education reform, and of course the tax hike
and its impact.
The 96th General Assembly ended its time in office with the
lame-duck vote on Jan. 12 to raise Illinois' personal income tax 67
percent and the state's corporate income tax 47 percent.
A day later the 97th General Assembly was sworn into office, and
state Sen. Matt Murphy, R-Palatine, said the lawmakers did not stop
fighting over the tax hike vote all year.
"I think the tax increase, and the job loss that it's created, is
the seminal event of coming out of Springfield this year," Murphy
January's temporary tax increases passed with only Democratic
votes, less than 12 hours before the new Legislature was sworn in.
Personal income tax rates went from a flat rate of 3 percent to 5
percent. For a family of four earning $40,000, that would amount to
an extra $800. The corporate income tax went from a flat rate of 4.9
percent to 7 percent, but its impact proved difficult to predict.
State Sen. Toi Hutchinson, D-Olympia Fields, said 60 percent of
businesses in the state do not pay the corporate income taxes, but
those that do "often pay a lot."
Both increases went into effect immediately. Original estimates
projected the state would rake in more than $6 billion annually.
State Rep. Pat Verschoore, D-Milan, had said, "Nobody wants to
raise taxes. It's going to cost me money just like everybody else,
but I think it was the right thing to do."
Verschoore and other Democrats said Illinois was out of options
to deal with its fiscal crisis and needed the tax increase to avoid
more serious fiscal problems.
Both the personal and corporate increases are scheduled to last
only four years. Families were told their tax rate would roll back
to 3.25 percent, but that would be up to a new Legislature.
However, the last time a temporary tax was approved, it became
permanent in 1990.
House Republican Leader Tom Cross, R-Oswego, had pointed to that
example, saying the notion of a temporary increase is "clearly
"You're setting up a scenario in 2015 when this tax is supposed
to revert back; the base is going to be so high that you can't do
it. It's kind of absurd," he said.
David Vaught, Gov. Pat Quinn's budget director, said Illinois'
fiscal health is contingent on the tax increase.
"Most of this money is temporary, so we can restore fiscal
stability and get our house in order and pay our bills. That's what
we're doing here. Without that kind of stability, you don't have
stability in your business climate, you don't have stability in your
vendor relationships, you don't have stability in your relationships
with school districts or local governments. And you can't. It's too
much chaos," Vaught said.
Death penalty abolition
Illinois became the 16th state to abolish the death penalty, but
it was not a quick process. Lawmakers voted Jan. 16 to end
executions. However, Quinn, a Democrat, didn't sign the historic
legislation until March 9.
Former Republican Gov. George Ryan placed a moratorium on the
death penalty in 2000, following news reports of innocent people
serving on death row. Three years later, Ryan commuted the death
sentences of 167 inmates to life in prison.
Hutchinson had said Illinois' system was broken.
"Executing one innocent person is too high a price to pay," she
However, several lawmakers argued for keeping the death penalty.
State Sen. Kirk Dillard, R-Hinsdale, said the law should be kept
for the "worst of the worst" crimes.
"Those who murder law enforcement officials or prison guards or
children, or the mass murderers, to me, need to have the death
penalty in most, if not all, cases," Dillard said.
Quinn, in March, said his conscience was clear, and he had no
regrets about ending executions in the state.
"This was the most difficult decision I've made as governor,"
Quinn said later during a news conference. "It was made after many
days and nights of reflection and review. For those who support this
decision, I've received many communications. And for those who
oppose this decision, I've received many communications."
The Illinois House and Senate waited until almost the last hour
of the last day of the session to agree to legislation that created
an entirely new system for handling workers' compensation cases.
Under the new law:
The governor has
the power to appoint new arbitrators, the state employees who
hear workers' compensation cases, for no more than three years.
Employers now can
send injured workers to one doctor instead of two.
Doctors' fees are
slashed by 30 percent.
The number of weeks workers can collect
compensation for certain injuries is reduced from 40 weeks to 28
Quinn said in June, "There's no better way to help people than
with a J-O-B, (and) we're going to be helping the employers of
Illinois, the workers of Illinois, all of those who are committed to
Before the legislation entered the picture, Illinois ranked among
the most expensive states for workers' compensation, contributing to
its "bad for business" reputation.
[to top of second column]
Of all of the new laws passed in 2011, perhaps only the education
reforms got President Barack Obama's attention.
Illinois lawmakers and education advocates said the reforms,
which passed in May, could become a national model.
Robin Steans, executive director for Advance Illinois, whose
website bills the group as an independent voice to promote the
public education system in Illinois, had said officials in
Washington, D.C., were watching the Illinois reforms.
"The United States Department of Education has been following
this closely. And my understanding is that the president was
interested in how the vote went today," said Steans. "So this
(measure) is getting, appropriately, attention for both the
substance and the process."
The reforms make it tougher for members of teachers' unions to
strike. Seventy-five percent of teachers would have to vote to go on
a picket line.
The plan also would make it easier to fire teachers by
streamlining the process. Supporters say the two-year process to
fire a teacher would be condensed to three to four months.
But Ken Swanson, president of the Illinois Education Association,
one of Illinois' major teacher unions, with 133,000 members, had
said the real take-away from the reforms was that all sides --
lawmakers, schools, unions and advocates -- worked together.
"Look at what happens when everyone can come together at the
table and talk," said Swanson. "That's something that colleagues in
other states have not been given the opportunity to do."
Business tax breaks
Even before lawmakers approved January's tax increases,
Republicans started talking about how the corporate tax hike would
drive businesses out of the state.
By the summer, Democrats had joined that conversation.
By the fall, two of the state's biggest companies -- the CME
Group, which owns the Chicago Mercantile Exchange and the Chicago
Board of Trade, and retail giant Sears Corp. -- were telling
lawmakers they may leave Illinois because of their high tax bills.
Lawmakers bickered through the two-week fall veto session and
were forced to deal with CME and Sears' issues during three "extra"
session days in late November and December.
In the end, lawmakers agreed to separate the tax relief for the
companies from the tax relief for working families and small
The first measure would:
earned-income tax credit, or EITC, for low-income households
from a maximum of $283 to $566, costing the state $55 million
Raise the standard tax exemption for
households from $2,000 to $2,050. This exemption would increase
annually based on the rate of inflation. If inflation was flat,
no increase would occur that year. The estimated cost is $20
million for the first year and would increase by about $20
million every year thereafter.
The second measure would:
Give the CME Group
an annual tax break of $85 million and Sears Corp. $150 million
in tax breaks over the next decade.
and development tax credits.
Reinstate the ability for businesses to
claim tax breaks if their incomes don't meet their expenses.
Quinn praised the EITC expansion as "one of the most important
votes" all year. The governor did not focus as much on the tax
breaks for CME and Sears.
Hutchinson said the Legislature's job in 2012 is going to be
making sure that Illinois doesn't have to deal with another tax
package like the one for Sears and CME.
"Until we've figured out a tax code that's low enough so that
companies don't have to come in for industry-specific tax breaks,
and ... we broaden the base so that two-thirds of our companies are
paying nothing, Illinois is always going to have a 1911 tax code for
a 2011 economy," Hutchinson said.
Statehouse News; By BENJAMIN YOUNT]