Tax hike drives Illinois budget growth

[July 08, 2011]  SPRINGFIELD -- Illinois taxed residents more -- instead of creating more jobs -- to amass about $1 billion more in revenue in 2011, according to a new report.

The Commission on Government Forecasting and Accountability, or COGFA, a legislative budgeting division, reports that personal income tax revenue grew from 2010 to 2011 by $564 million, from $831 million to $1.3 billion. Corporate tax revenue climbed $147 million in the same budget years, from $256 million to $403 million, according to the report from COGFA. Those are 67 percent and 57 percent increases, respectively.

The 67 percent collected in personal income tax revenue mirrors the 67 percent personal income tax increase. The 57 percent collected in corporate income tax revenue is a bit more than the 47 percent corporate income tax increase approved earlier this year.

The median income for a family in Illinois in 2009, the most recent year available, was $53,974, according to the Census Bureau. The new 5.25 percent income tax rate would have that family paying more than $2,800 in income tax a year.

State Sen. Dave Syverson, R-Rockford, said this year's tax revenue does not indicate a strong state economy with new jobs.

"The revenues were up 67 percent, which is what the tax increase was," said Syverson. "There has been really no growth in tax revenues from last year to this year."

But Kelly Kraft, Gov. Pat Quinn's budget spokeswoman, is quick to say that Illinois has been adding jobs.

"We lead the Midwest in job creation, creating more than 100,000 jobs since January 2010," said Kraft. "Also in 2010, Illinois exports, which support more than half a million Illinois jobs, increased by 20 percent."

Illinois' unemployment rate was at 8.9 percent in May, down from 10.5 percent in May 2010, according to the state's Department of Employment Security. Unemployment numbers for June have not been released yet.

Kraft said that Quinn's office expects to see even more new jobs this year.

"We do anticipate the first half of fiscal year (2012) will show more growth than the slow economic growth that was experienced in the first half of 2011," said Kraft.

The COGFA report points out that money collected from the state's sales tax grew at a much faster rate than expected. Sales tax revenue jumped from $6.3 billion in 2010 to more than $6.8 billion in 2011. The sales tax numbers reflect the spike in prices at the gas pump from earlier in the year.

Syverson said prices for several products increased, resulting in higher sales tax revenue.

Kristina Rasmussen, executive vice president with the Illinois Policy Institute, a group that has advocated for large cuts in state spending and sweeping changes in tax policy, said taxpayers are getting a "raw deal."

"Revenue collections are up thanks to the tax hike, but it's at the expense of Illinoisans who are paying a week's wages in extra taxes this year," said Rasmussen. "To make matters worse, those extra tax dollars are financing pension and debt costs, not additional services."

Rasmussen and Syverson agreed that Illinois should grow the economy by adding new jobs. Both the Senate GOP and Illinois Policy Institute have released "job creation" plans that involve lowering taxes.

Syverson said Illinois is going to have to add a lot of jobs, and create a lot of new dollars, if the state is ever going to roll back the tax increases.

"The way this budget was passed, and some of the spending that's been put into place, it's going to be very difficult to have this tax be a temporary tax," Syverson said.

[Illinois Statehouse News; By BENJAMIN YOUNT]