 The package started as a move to lower the tax bill for two
Chicago-based financial exchanges, CME Group Inc. and CBOE Holdings
Inc., which are threatening to leave Illinois. Then a tax break for
Sears was added to the mix. That was followed by tax incentives for
businesses in general, and then measures to help poor families.
Each new tax break means less money to run state government,
requiring officials to get more money elsewhere or cut services.
The full cost of the package would hit state government in fiscal
2014, just before the state's temporary income tax increase expires.
"A lot of bad things happen in 2014, a lot of difficult things,"
said Rep. Frank Mautino, a Democratic leader on budget issues.
Gov. Pat Quinn's administration calculates that the tax package
would generate an additional $520 million in its first year. Then it
would cut revenue about $200 million the second year. If the tax
package were passed in its current form, the cost would soar in the
third year to about $850 million annually.
State government would have to absorb most of that loss, but 6
percent -- or about $50 million -- would hit the budgets of local
governments across Illinois.
Top officials would say little Thursday about the potential cost.
A spokeswoman for the Democratic governor stressed that the
proposal is far from final, but that Quinn definitely wants to pass
something when lawmakers return to Springfield on Nov. 29. He is
"very committed and very interested in getting something achieved to
help the business climate and also help working families," said
spokeswoman Brooke Anderson.
Republican legislative leaders had pushed to expand the tax
package so that it helped businesses in general, not just select
companies that made threats. They would not discuss whether $850
million would be an acceptable cost.
"There is no agreement on a plan or proposal, therefore no cost
estimate at this time," said Sara Wojcicki Jimenez, a spokeswoman
for House GOP Leader Tom Cross of Oswego.
"It's all a work in progress," said Patty Schuh, a spokeswoman
for the Senate's top Republican, Christine Radogno of Lemont.
Senate President John Cullerton, D-Chicago, sponsored a version
of the tax incentives that was approved in committee.
"The cost is always a concern," said Cullerton spokesman John
Patterson. "The Senate president has made it a priority to find a
way to make this revenue-neutral and is open to suggestions from the
other caucuses."
House Democrats have expressed the most skepticism toward the
proposal.
"We're starting from scratch. We're taking all these proposals
and ideas, taking them apart, analyzing them and then trying to put
back together what works," said Rep. John Bradley, a Marion Democrat
who chairs the House Revenue Committee.
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The push for tax breaks began with the two trading firms, who run
the Chicago Mercantile Exchange and the Chicago Board Options
Exchange, complaining that they are taxed on every transaction they
handle, even electronic trades where the buyer and seller are not
located in Illinois.
Officials are now looking at the possibility of taxing the
exchanges on only 27.54 percent of their business. That would reduce
government revenues by $85 million a year, according to the Illinois
Department of Revenue.
Ten years of tax breaks to keep Sears Holdings Corp. from leaving
Illinois would cost an additional $15 million annually.
General breaks available to all businesses, such as a
research-and-development credit or lowering the fee for
incorporating, would cost nearly $340 million a year. Republicans
say all businesses need some relief from the income tax increase
pushed through by Democrats early this year.
The proposal, at least as it stands, also includes provisions to
help the working poor. The earned-income tax credit would be
expanded, costing $90 million the first year and $180 million a year
after that. The personal income tax exemption would be linked to
inflation, costing about $20 million more each year.
Initially, these costs would be offset by "decoupling" from a
federal tax incentive for business, one that lets them speed
depreciation claims on their equipment. Doing away with that is why
the tax package could potentially be a net gain for the state in its
first year. But the benefits of that change fade and then disappear
entirely, leaving only the loss of tax revenue for state and local
government.
[Associated Press;
By CHRISTOPHER WILLS]
Christopher Wills can be contacted at
http://twitter.com/ChrisBWills.
Copyright 2011 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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