The 2015 budget unveiled Wednesday by Gov. Pat Quinn makes the temporary 67 percent income tax increase permanent, breaking a promise made by Quinn and other Democratic leaders.
In a move skeptics warned was coming since the moment Democratic lawmakers raised the tax three years ago, Quinn's budget counts on keeping the tax hike, which is scheduled to start sunsetting Jan. 1. Lawmakers in 2011 raised the income tax 67 percent on individuals and 46 percent on businesses.
Quinn in his short 25-minute budget address warned of "savage" cuts that would "starve" education and other services should the tax start expiring as scheduled, halfway into 2015 state budget year starting July 1. Senate Democrats estimate the budget gap next year at about $2.9 billion – $1.6 billion of that if the income tax hike decreases as was promised.
"If action is not taken to stabilize our revenue code, extreme and radical cuts will be imposed on education and critical public services," Quinn said. "Cuts that will starve our schools and result in mass teacher layoffs, larger class sizes and higher property taxes."
Quinn's budget ties in to the "birth to five" initiative he outlined in his State of the State Address in January – it calls for spending $100 million next year on early childhood programs and adds another $50 million for college assistance.
The Democratic governor, who faces a tough re-election campaign against Republican Bruce Rauner, offered taxpayers a proposal for property tax relief in the form of an annual $500 rebate, and increasing the earned income credit for low-income families. He also stated he would not accept new taxes on retirement income or expanding sales taxes to commonly used services.
McHenry County's local representatives lashed out at Quinn for what they called more taxing and spending financed by the breaking of a promise to taxpayers to let the tax increase expire. The increase of the state's flat tax from a 3 percent to a 5 percent rate took about a week's pay from every Illinois taxpayer.
"With his announcement that he is pushing to make the temporary tax increase of 2011 permanent, he has shown us all that anything he says can't be trusted," state Rep. Barbara Wheeler, R-Crystal Lake, said. "He is on record in 2011 as saying the income tax increase was temporary, but now he wants to take more and more out of the pockets of working Illinoisans and small businesses."
Rep. David McSweeney, R-Barrington Hills, called Quinn's budget "a recipe for economic disaster," while Rep. Jack Franks, D-Marengo, said taxpayers "were lied to" in 2011 when told the tax increase would be temporary. What's more, Franks said, the state's fiscal predicament is worse than it was when the tax increase was approved.
"In this governor's mind, nothing is as permanent as a temporary tax increase," Franks said. "His proposed extension of the current income tax rates is simply the wrong policy to address the economic challenges our state faces."
Democratic lawmakers in the final hours of lame-duck session January 2011 approved the tax increase before the new General Assembly elected in November 2010 was sworn in. It passed with the bare minimum of votes needed in both houses, aided by 12 outgoing lawmakers, two of whom campaigned against the increase but lost re-election. Those two, and four others, ended up with government jobs and the pensions that come with them, raising allegations of quid pro quo.
The increase was sold by Quinn, Senate President John Cullerton and others as a temporary measure to right the state's fiscal ship and pay down billions of dollars in unpaid bills. The tax increase is scheduled to decrease Jan. 1 from 5 percent to 3.75 percent for the individual rate, and from 7 percent to 5.25 percent for businesses.
But almost all of the new revenue generated – $31 billion if the tax is allowed to expire as promised – was swallowed by the state's ballooning public pension obligations.
"We were told the $31 billion would be used to pay down bills, get Illinois back on solid footing and ensure a strong economy," state Rep. Mike Tryon, R-Crystal Lake, said. "Gov. Quinn has failed on all three counts and now wants to renege on the promise that tax relief would be realized in 2015. The governor's announcement today that he wants that tax hike to become permanent is a slap in the face to the taxpayers who are stretched to their limit."
Illinois presently has the worst credit rating of all 50 states, is tied for the second-highest unemployment rate, and Moody's Analytics earlier this year projected the state's job growth rate for 2014 as the lowest of all states, or about 57,000 new jobs. An annual survey by United Van Lines put Illinois in second place in 2013 for people moving out, and a U.S. Census Bureau report put Illinois at the top for out-migration between mid-2012 and mid-2013.
State Sen. Pamela Althoff, R-McHenry, brought up another trust issue in the form of a scathing February audit from the state Auditor General regarding waste and mismanagement at a Chicago anti-violence program launched by Quinn during his 2010 campaign.
"To trust them with even more money through a continuation of the 67 percent income tax increase or a progressive tax is a complete nonstarter for me," Althoff said.
Wednesday's budget address is not the first time that Quinn has broken a promise regarding the tax hike. While campaigning in 2010 on the need for a tax hike, Quinn pledged to veto any tax increase greater than 33 percent, but signed into law a 67 percent increase.
Rauner, the wealthy Winnetka venture capitalist who won the March primary to run against Quinn, wasted no time in hammering Quinn for the reversal.
"Pat Quinn first promised the working people of Illinois he wouldn't raise taxes by 67 percent," Rauner said. "He broke that promise, taking away nearly a week's worth of pay for Illinois families. Then he promised his tax hike would be temporary. Today, he broke that promise too, and is doubling down on his failed policies."
The political cost to Quinn is to be determined, but a poll released Monday by the Paul Simon Public Policy Institute at Southern Illinois University at Carbondale shows that 60 percent of Illinois residents want the tax to roll back as promised, with only 27 percent believing it should become permanent.
Cullerton, among the loudest voices in 2011 assuring that the tax hike would be temporary, was quick to support Quinn's proposed budget.
"In order to stay on this path of fiscal stability, we have to maintain the same level of revenue," Cullerton said. "Voting to maintain our current tax rate is a responsible action that keeps Illinois' income taxes among the lowest in the nation."
This also is not the first time that an attempt was made to make a "temporary" income tax increase permanent. Republican Gov. Jim Edgar ran in 1990 on a platform that included making sure that an income tax hike set to expire did not.