Gov. Bruce Rauner used his annual budget address Wednesday to encourage state lawmakers to reach a “grand bargain” budget deal, but said reforms that would accompany proposed tax increases need to be significant before he would sign it.
Rauner thanked the Senate for continuing to work on a budget deal that would end an almost 2-year-old budget stalemate. The Republican governor has stayed out of the process so as “not to disrupt the momentum.”
“First and foremost, the final result must be a good deal for taxpayers and job creators – a grand bargain that fully balances the budget once and for all, and really moves the needle when it comes to job creation,” Rauner said.
However, he told lawmakers near the end of his 40-minute address that some of the reforms being kicked around in exchange for massive tax increases are not adequate.
Rauner said a permanent statewide property tax freeze like one that passed the House in the final days of session last month, not the temporary two-year freeze now being considered, is needed. Studies place Illinois’ property tax burden at the highest or second-highest of all 50 states.
“The current Senate proposal calls for a permanent increase in the income tax rate, but offers only a temporary property tax freeze in exchange. That’s just not fair to hardworking taxpayers across the state of Illinois,” Rauner said.
Rauner also said that although he is open to expanding the state sales tax to some services, similar to neighboring states, he opposes the current Senate proposal to raise taxes on food and drugs.
“We cannot raise taxes on people’s groceries and medicine, just as we cannot tax people’s retirement incomes. We can find a way to balance the budget without hurting lower-income families and fixed-income seniors,” Rauner said.
Taxing retirement income is not in the current Senate plan, but has been floated by some outside groups pushing for tax hikes to help reach a balanced budget and ending the nation’s longest state budget stalemate since World War II.
The Senate proposal – first developed by Senate President John Cullerton, D-Chicago, and Minority Leader Christine Radogno, R-Lemont – seeks to end the budget impasse. It began in 2015 when Rauner vetoed a budget, with a deficit of almost $4 billion, submitted by the Democratic-dominated General Assembly.
It proposes to raise the state income tax from 3.75 percent to 4.99 percent for people filing individually, or just less than the 5 percent rate that Illinois taxpayers paid for four years until it substantially expired in 2015. The corporate tax rate would increase from 5.25 percent to 7 percent, which doesn’t include the 2.5 percent replacement tax.
In his address, Rauner said the Senate plan should include a firm cap on spending to keep any balanced budget from lapsing back into deficit. He also said that the income tax rate should be decreased once the economy grows and revenues expand, rather than surpluses fueling more government spending.
McHenry County’s lawmakers in Springfield liked what Rauner had to say, but some have been wary of the proposed grand bargain.
Sen. Dan McConchie, R-Hawthorn Woods, said he was encouraged by Rauner’s calls to fully fund education, reform the state’s pension system and enact job-friendly reforms. McConchie has stated that he opposes raising the income tax and that he finds the proposed reforms too lackluster in exchange for the tax increases being proposed.
“I believe Gov. Rauner showed real leadership today and presented a clear plan to the General Assembly that benefits taxpayers and emphasizes the need for state government to live within its means,” McConchie said. “Under the governor’s guidance and vision, Illinois can become a competitive state.”
Sen. Pam Althoff, R-McHenry, said she appreciated Rauner’s support for the Senate – which she said “has a good thing going” – to develop a budget deal with strong changes to grow the state economy.
“A balanced budget deal cannot be just about raising taxes. That doesn’t work. We need structural changes to move our state forward on a path to prosperity,” Althoff said. “The time is now. I call on my colleagues to get it done.”
State Rep. David McSweeney, R-Barrington Hills, had hoped that Rauner would come out strongly against what he calls a “disastrous” tax increase plan. McSweeney has stated that he will not support any budget deal that includes tax increases.
However, McSweeney getting a chance to vote on the plan would require it to pass the Senate, and House Speaker Michael Madigan agreeing to bring it to the House floor. An attempt to get the bills passed last week was not successful.
“I hope that General Assembly Republicans don’t support the Senate tax plan and become tax collectors for the Chicago Democratic machine,” McSweeney said.