State Government

Tax extension could come up in lame-duck session

Don’t pop the champagne corks to the demise of the 67 percent “temporary” income tax increase just yet.

Yes, House Speaker Michael Madigan caved at making the income tax permanent because he could muster only about half of the 60 votes that he needed from his fellow Democrats. And yes, the end of the spring legislative session Friday increased that threshold to 71 votes until the end of the year, when the temporary tax is set to sunset.

But the tax increase debate could very well return after the Nov. 4 election, when leaders who support making the tax increase permanent will be able to marshal more votes.

Re-elected Democrats who were afraid of incurring voter wrath for breaking a promise may be more amenable to voting yes because they are “safe” for another two years and have received six months of pressure from groups that want the tax made permanent. Lawmakers defeated at the polls may be persuaded to vote yes because they either have nothing politically to lose, or by the promise of appointment to a high-paying government job after they leave office.

What’s more, the number of votes needed in the House to pass legislation that takes effect immediately drops back to the 60-vote simple majority on Jan. 1 – the very day the tax increase sunsets. This gives lawmakers a two-week window until the Jan. 14 seating of the new General Assembly to raise taxes.

If the above scenario sounds familiar, it’s because that’s exactly how state lawmakers after the 2010 election raised your income taxes by 67 percent. While Madigan has demurred on the topic, Democratic Senate President John Cullerton said that revisiting the tax vote after the election is a possibility.

“While a vote on our tax rates has been deferred, rising costs and pressures will force the issue at a later date,” Cullerton said in a statement Friday.

Whether that scenario repeats after the election, according to most of McHenry County’s lawmakers, depends on whether voters re-elect incumbent Democratic Gov. Pat Quinn or Republican challenger Bruce Rauner.

“I think if Pat Quinn is re-elected, he’ll definitely try to bring it up in the January [lame-duck] session because they’ll need only 60 votes,” said Rep. David McSweeney, R-Barrington Hills. “The best way to fight this is to make sure Bruce Rauner is elected governor.”

It’s a belief shared by fellow Rep. Mike Tryon, R-Crystal Lake. But Sen. Dan Duffy, R-Lake Barrington, said he does not believe a Rauner victory would automatically sink any attempt at a lame-duck tax hike.

“I think they still might go for it. Even if Bruce Rauner wins, as the leader of the General Assembly, Madigan is going to have to come up with the money somewhere,” Duffy said.

The governor’s race is almost sure to become a referendum on whether to break the promise and make the tax hike permanent, with Quinn strongly favoring the idea and Rauner opposing it.

While Democratic Rep. Jack Franks agreed with his fellow lawmakers that the tax rate extension will be a core issue in the election, he differed on the idea that a Rauner victory will mean the tax expires as scheduled Jan. 1. Franks, who like his GOP colleagues opposed the tax increase, pointed out that Rauner has yet to reveal his plans on how to straighten out the state’s dire finances.

“If Quinn wins, I think you’ll see [the tax increase] come up in January. If Rauner wins, it may still come up, based on whatever his plan may be,” said Franks, D-Marengo.

Illinois workers have paid on average an extra week’s salary in income taxes since Democratic lawmakers in the January 2011 lame-duck session, without a single Republican vote, raised the state income tax 67 percent on individuals and 46 percent on corporations. The tax was raised from 3 to 5 percent for individuals, and from 4.8 to 7 percent for corporations. The total corporate tax rate is 9.5 percent when the personal property replacement tax is included.

The vote took place just hours before the swearing-in of the new General Assembly that was elected in November 2010. It passed with the bare minimum of votes needed in the House and Senate, with the help of 12 outgoing lawmakers who were either retiring or had lost their re-election bids. Six of them, including two who campaigned against the tax hike, later ended up with government jobs.

Quinn ran on the need for a tax increase and promised during his 2010 campaign that he would veto any increase above 33 percent, but signed the 67 percent increase into law.

Democratic lawmakers who reassured the public that the tax increase would be temporary sold it as a stopgap measure needed to straighten out state government’s dire finances and pay down a shameful pile of unpaid bills. But it didn’t work – beside the fact that state spending since then has increased, most of the $31 billion the new tax rate is predicted to generate has been swallowed by the state’s ballooning public pension obligations.

The bill Quinn signed into law contains language that sunsets much of the tax increase on Jan. 1, which is halfway through the next fiscal year, which for state government runs from July 1 to June 30. Rates are set to decrease to 3.75 percent for individuals and from 7 percent to 5.25 percent for businesses.

Quinn in his 2015 budget address in March asked state lawmakers to make the tax permanent, lest the state suffer draconian cuts that would hurt its neediest residents. The House in late May, on a series of very close votes, approved appropriations for next fiscal year that counted on keeping the tax increase permanent.

But Madigan on Memorial Day announced that extending the tax was a dead issue for the spring session. A caucus of his 70 fellow House Democrats several days earlier – the entire House is elected every two years – concluded that he had barely half of the votes needed. And that included the vote of State Rep. Derrick Smith, D-Chicago, who asked the judge at his ongoing trial for bribery and extortion if the proceedings could be postponed so he could vote. The judge denied the request.

Opponents of the original budget appropriations alleged that it was setting up for a vote to keep the tax hike permanent. But McSweeney and Tryon said the new budget, which among other things counts on $650 million in borrowing from other state funds, in essence does the same.

“We’re leaving here with an unbalanced budget, we’re raiding funds through fund sweeps, and they’re setting up the argument for future tax increases,” McSweeney said.

Senate President Cullerton, who like Madigan commands a Democratic supermajority vote, said that he has the 30 votes necessary to make the tax increase permanent. The Republican minority has made unsuccessful efforts to prevent a tax vote in the lame-duck session – three bills aimed at asking for a constitutional amendment and a fourth looking to change the Senate’s rules have not advanced.

Supporters of lame-duck voting sessions argue that they give lawmakers a vital tool needed to advance necessary legislation that otherwise would not be able to pass – the General Assembly during the same 2011 lame-duck session also voted to abolish the death penalty and allow civil unions for gay couples. Opponents argue that lame-duck sessions are a way for lawmakers to avoid answering for their decisions to voters.

“They’re going to pay off those [outgoing] legislators with jobs and political appointments and get the votes after the election is over. That’s what I’m worried about,” Duffy said.

The debate in a gubernatorial contest on whether a temporary tax should become permanent has historical precedent as well. The previous rates of 3 percent for individuals and 4.8 percent for businesses was itself supposed to be a temporary, two-year measure when state lawmakers increased it in 1989 from 2.5 and 4 percent, respectively. But in the 1990 election, Republican governor’s candidate Jim Edgar ran, and won, on a platform that included making the new rates permanent. His Democratic opponent, Neil Hartigan, opposed the idea.

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