Tax Federation president says Illinois must show some fiscal discipline


Written by Mark Fritton

The head of the Civic Federation — a largely Chicagoland business group — on Monday gave a panel of Illinois state senators some hard advice:

Illinois has to control its spending and pay its debts, and it must do so for several years.

Laurence Msall, the federation’s president, reviewed some of the group’s recommendations for a state budget for fiscal year 2016, which begins July 1.

The overall message: Cut spending and raise revenue. Commit to a plan of at least five years and stick with it.
Illinois is going into the coming fiscal year with an estimated $6.2 billion deficit, its pension obligations underfunded by about $110 billion, and with a stack of past due bills about $3 billion high.

Msall said no single tax rate nor any single change to business law would mean as much to companies considering investment in Illinois as much as putting the brakes on annual crisis and always changing taxation.

And the state should learn to spend less, he said.
“There is no revenue proposal, there is no tax increase big enough to stabilize the state finances even over the next five years if we don’t hold the line on discretionary spending,” Msall told members of the Senate appropriations committees.

The federation supports about $2 billion in cuts identified by Gov. Bruce Rauner, but it also says more tax dollars are needed.
Among its recommendations:

  • Increase income tax rates, with the personal rate going from 3.75 percent to 4.25 percent and the corporate rate from 5.25 to 6 percent;
  • Tax retirement income, excluding Social Security income, above $50,000;
  • Eliminate the sales tax exemption for food and non-prescription drugs, at least until the state’s unpaid bill backlog of about $6 billion is eliminated.

Sen. Jim Oberweis, R-Sugar Grove, said he found much to agree with in the federation’s approach, particularly the need for balanced budgets, retirement of debt and adherence to a multi-year plan.

“But I’m disappointed they were pushing for lots of tax increases because it’s pretty clear that in the past, when we’ve had these tax increases, the Illinois Legislature has just found ways to spend (the revenue) and not pay down our debt and move the state forward,” he said.
Trusting the General Assembly to follow a plan also seems overly optimistic, he said, citing Springfield’s years of knowingly kicking pension payments down the road.

“The only way to reduce this bloated government is to starve of it some finances,” Oberweis said.

Msall acknowledged such a plan might be a tough sell.

“We all need to sacrifice something; everyone will have to give more,” he said. “There is no you or them. It’s us.”
“Real sacrifices will have to be made,” Msall said. “People will have to act against their interests in order for a grand bargain to save these (state and local) governments.”

He also cautioned against taking in additional revenue without cutting spending.

“Those that don’t support the level of cuts the governor has indicated, they need to come to the table with revenue,” he said. “They need to be honest with the citizens, with everyone, that they’re not helping the people they are attempting to protect if they don’t provide revenue.”

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