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Our View: Future of state’s income tax

Published: Monday, Jan. 27, 2014 5:30 a.m. CDT

When state lawmakers return to Springfield on Tuesday, they are expected to take up the future of the state’s income tax.

The right thing to do is to keep their word to the public and allow the increase to roll back beginning in 2015.

The history of the tax increase is dubious in and of itself: It was passed in January 2011 with the help of lame-duck lawmakers, some of whom went on to find gainful employment working for the state of Illinois.

The increase hiked the tax on personal income from 3 to 5 percent for individuals, and on corporate income from 7.3 to 9.5 percent.

While this unpopular increase was negotiated, lawmakers decided that it should be temporary, and that by 2015, rates should decline to 3.75 percent for personal income and 7.75 for corporate income.

The argument against allowing the tax to roll back is that it will create budget deficits: Gov. Pat Quinn’s office of management and budget projects the state budget deficit would grow to $1.9 billion in 2015 and $4.1 billion in 2016 if legislators keep their word to taxpayers. But that seems more like an argument for the state to adjust its spending priorities, something that is long overdue. Illinoisans haven’t been paying the full price of the government they have, which is evident from the $100 billion in unfunded pension obligations and backlog of unpaid bills the state has accrued.

The chief benefit of the income tax increase has been to enable the state to continue spending beyond its means. Despite all-time highs in collected revenue, the unpaid bills remain, as does the pension chasm and the state’s lowest-in-the-nation credit rating.

Rather than focusing on retaining a “temporary” tax increase, legislators instead should spend the time before the tax increase rollback to create a government we can afford. We also need to find revenue streams beyond the old standbys of “sin taxes” on tobacco, booze, and gambling, gambling and more gambling.  

One sure-fire way to generate more revenue without hiking taxes is to grow the economy and attract new jobs. To do that, Illinois needs a tax policy that makes it more attractive to outside investment, not less. High taxes on people and companies are not a selling point.

Lawmakers included a sunset clause in the tax increase legislation for a reason. Now is the time for them to make the tough decisions they did not make in 2011.

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