Illinois revenue bump spurs debate over Pritzker tax hikes

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The terms "Illinois budget" and "extra revenue" are rarely heard in the same sentence. But now that they are, "spending agreement" is the elusive terminology.

Lawmakers and Gov. J.B. Pritzker learned this past week that the state's income tax take in April was a stunning $4 billion , 38% more than the year before and some $1.5 billion more than projected.

Now House Republicans are asking why Pritzker and his fellow Democrats who control the House and Senate can't forgo their plans to increase taxes.

First and foremost, GOP House Minority Leader Jim Durkin is targeting Pritzker's plan to change income-tax collection to a graduated structure , forcing the wealthy to pay more. But he's also taken aim at Pritzker proposals to tax plastic bags, hike duties on cigarettes and vaping materials, and limit retailers' reimbursement for collecting sales tax at the cash register .

"There's no need to talk about raising taxes on bags, cigarettes, businesses or the middle class," Durkin said. "The desperate pleas for more taxes have rung hollow in Illinois for years. And now taxpayers know the truth. We have the money to balance the budget without new taxes."

Pritzker took office in January after a tumultuous four years in which Republicans' and Democrats' locked horns prompted a two-year budget standoff that meant continued spending for court-ordered expenses and slashed support for higher education, social services and more.

A $15 billion pile of past-due bills was substantially reduced only by taking on more debt through borrowing and still stands at $6.6 billion , to say nothing of the Damocles' sword of long-term debt exemplified by the $137 billion the state owes to its five pension systems.

Implementing a graduated income-tax structure, Pritzker promises, would generate $3 billion extra annually by taxing wealthier filers whose financial intake is increasing faster than lower-income earners. But that would require voter approval and couldn't take effect until 2021 .

In the interim, he proposed new or increased taxes and loophole closings to produce $1.12 billion , the biggest of which would be by legalizing recreational marijuana use and sports betting. Legislation is moving, albeit slowly, in both areas.

In others, such as a tax on plastic grocery bags or the retailers' sales-tax discount, there's not much action. And still others, such as new taxes on video gambling and taxes on managed-care organizations, will likely be part of negotiations for a full-year budget, which lawmakers are aiming to conclude before their May 31 scheduled adjournment.

Through a letter from budget aides , Pritzker told lawmakers last week that he intended to use the April windfall to help cover the expected $1.6 billion debt in the current budget.

The administration considers "several of the growth factors as likely one-time sources," said the letter from Revenue Director Davis Harris and Budget Director Alexis Sturm. "These sources include the stock market's performance and taxpayers' adjustments in their withholdings because of the new federal tax law. These factors have limited the growth that can be expected."

An $800 million revenue increase for the budget that begins July 1, projected by the Legislature's bipartisan forecasting arm in March, should be put toward the state's required $9 billion pension contribution, the letter said. That would allow Pritzker to dump one contentious idea to lighten the pension load by borrowing, selling state assets and stretching the long-term payoff by seven years. Critics maligned it as a "pension holiday," a term that conjures the decades-old practice of skipping pension payments which put the state in the hole it's in today.

Those realities inspired Democrats' ridicule of House Republicans' suggestion.

"Manna from heaven will get us out of the desert, but it will not feed us for years to come," said assistant Democratic Senate Leader Don Harmon of Oak Park.

Such reproach oversimplified the GOP's point. They emphasized that the extra money in April and projected for next year meant that, along with responsible cuts, the state could balance the books without more taxes. Deputy House Republican Leader Tom Demmer of Dixon said legislative working groups had done just that even before news of the April surprise.

"While the work has been difficult, and while there's been some pain, while there's been some strife in those committees, most committees were able to come to a point where we had balanced proposals without including any of the governor's tax increases," Demmer said.

Agreed, House Majority Leader Greg Harris said - but the resulting cuts to education, child care, senior services and cancer screenings "should be distasteful to every single person in Illinois."

"None of these things anyone here wants to see," the Chicago Democrat told The Associated Press. "But if we're going to live within the means we have, the available revenue, that's what it would take. So should some of these other (tax) measures pass, we can build up from that."