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GOVERNMENT RELATIONS


Alliance Legislative Report 97-36

Distributed via Email: December 14, 2011

TAX BILLS APPROVED

Both chambers of the Illinois legislature squeezed in one more legislative day this week, enabling them to send a couple of tax re-structuring bills to the governor.  In a legislative session that was supposed to have concluded on November 10 th, lawmakers returned to the Capitol for a day-long session on November 29 th, but were unable to agree on a tax bill at that time, forcing them to schedule another session day this week.  

The House of Representatives convened on Monday, approved the two revenue bills, then adjourned. The Senate went into session Tuesday, also approved the legislation at hand and adjourned. The General Assembly’s next scheduled session day is January 31, 2012.

THE TAX ISSUE

Earlier this year Governor Pat Quinn signed into law a bill that increased the income tax rates for both individuals and corporations. Since then, there have been reports of Illinois corporations threatening to leave the state because of the “unfavorable business climate” here. Discussions this week focused on plans to offer tax breaks to certain Illinois businesses which had made those threats. The Sears Corporation and the CME Group (Chicago Mercantile Exchange and Chicago Board of Trade) were at the center of the debate.

Though the tax break legislation passed overwhelmingly in both the House and Senate, many concerns were voiced over this method of attempting to stabilize the Illinois economy. Why is the General Assembly choosing “winners and losers” among corporations by selecting specific companies in which to grant tax breaks? What happens next year when inevitably a new list of corporations line up at the State House door for their tax advantages? Shouldn’t the legislature attempt to structure a comprehensive tax package that applies to all Illinois businesses?

Indeed, some lawmakers are planning legislation for next year that will roll back the corporate income tax rate to levels set before the last tax increase. This, of course, would be welcome news to Illinois businesses but could amount to a $900 million shortfall to the State treasury.

NOT JUST FOR BUSINESSES

Governor Quinn has been insisting that, if tax relief was going to be granted, poorer taxpayers should also receive a benefit. He proposed to increase the Earned Income Tax Credit for low-income families from 5% to 10%. This proposal, like that for corporate tax relief, was not met without some resistance as some lawmakers questioned the reasoning behind the plan.

Some legislators believed that the current tax debate was centered on ways to jump-start the State economy. The corporations with their tax breaks would be able to improved productivity and ultimately hire more employees. Individual taxpayers, however, would not have such an economic impact and therefore should be left out of the tax break discussion for now. Others had reservations about helping the top corporate taxpayers and the lower-income individual taxpayers, but providing nothing for those in the middle – thereby further squeezing small businesses and middle-income taxpayers.

THE LEGISLATION         

SB 397 (Hutchison, D-Olympia Fields) contains the corporate tax break provisions. Generally, it provided about $85 million in incentives for the CME Group and $15 million in breaks for Sears, along with some provisions for other, smaller entities. The bill was approved in the House on a vote of 81-28-7 and in the Senate on a vote of 44-9.

SB 400 (Hutchison) contains the individual taxpayer provisions. It increases the Earned Income Tax Credit for low-income families from 5% to 10% of the federal tax credit. The bill also increases the personal income tax exemption for all Illinois taxpayers from $2,000 for every person in a household to $2,050 per person. The bill was approved by the House on a vote of 67-49 and in the Senate on a vote of 48-4.

The two tax bills will result in about 330 million fewer dollars flowing into State coffers. This is a significant hit to a treasury that is already at record deficits and facing a stack of unpaid bills. The bills will be sent to the Governor who is expected to quickly sign them into law.

This legislative report is written and edited by the lobbyists of the Illinois Association of School Boards to provide information to the members of the organizations that comprise the Illinois Statewide School Management Alliance.

Bill Text/Status: Illinois General Assembly www.ilga.gov


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