Tax hike brings no money, more problems to Illinois cities

[January 14, 2011]  SPRINGFIELD -- The income tax hike is expected to generate billions of new dollars for the state, but some Illinois mayors are upset they won't be getting bigger slices of the pie.

Under the new plan, the state would gain more than $6 billion annually from the individual tax rate increase from 3 percent to 5 percent and the corporate rate increase from 4.8 percent to 7 percent. The increase is set to expire in four years. Gov. Pat Quinn just signed the bill into law late Thursday afternoon.

Illinois has a special fund that benefits local cities. In the past 15 years, cities have been receiving 10 percent of the state's income tax revenue. But when the state income tax goes up, cities will not get a cut of the new money.

Tom Hoechst, mayor of Alton, e-mailed lawmakers before they voted on the bill to remind them that cities are part of the state revenue too.

"(Illinois) is helping everyone else, why not cities?" Hoechst said. "No one is suffering worse than the cities."

If cities were to get bigger slices as the state pie gets bigger, the local government fund would have received an extra $2.9 billion, according to a study by the Illinois Municipal League.

The city of Alton's public safety may be on the line. Hoechst said his city is already short of police and firefighters.

Mayor Scott Eisenhauer of Danville said his city could have used the extra funding toward public safety, infrastructure and neighborhood redevelopment.

"We are already so stretched thin, and to have that increase, it allows us to gravely decrease our ability to provide those services," said Eisenhauer, who had to cut 72 city jobs in the past six years. "Our funding has decreased an average of 3.5 percent over the course of two years."

City leaders are also concerned about losing their businesses to bordering states.

Dennis Pauley, mayor of Rock Island, said his city -- located on the Iowa border -- will not lose any money from the state funding, but he is worried that businesses would pack their bags and move next door because of the corporate income tax increase.

State Rep. Pat Verschoore of Rock Island said he voted yes on the tax hike so the state could pay off its deficit. The Democrat said he doesn't think a lot of businesses would actually leave the state within the four-year time span of the temporary tax increase.

Because Danville sits just west of the Indiana border, Eisenhauer said the tax increase stiffens corporate competition with the Hoosier state.

Hoechst has a similar situation, since Alton sits across the Mississippi River from Missouri.

"We are creating a very anti-business climate in this state," he said.

[Illinois Statehouse News; By MARY J. CRISTOBAL]