Wisconsin hopes to benefit from Illinois tax hike

January 12, 2011

David Schaper

Illinois lawmakers have voted to increase the state's income tax almost 67-percent to help reduce the state estimated 15-billion dollar budget deficit.  Illinois Governor Pat Quinn supports the move, and promises to sign the measure..

Illinois is a fiscal mess. The state is months behind in paying it's bills and it's not just vendors and social service agencies waiting to be paid, but schools and local governments, too.

The state's been borrowing so much and racking up such a huge debt that Illinois' credit rating is now tied with California as the lowest in the country.

Calling his state a fiscal house on fire, Gov. Pat Quinn says in order to keep Illinois from becoming "a fiscal basket case," the state's residents and businesses need to pay higher taxes.

So in the waning moments of a lame duck session early Wednesday, with no Republican support and not a single vote to spare, Illinois' lawmakers voted to raise the states personal income tax rate from 3 percent to 5; and the corporate tax from 4-point-8 to 7 percent -- all for four years.

"The concept here is this is a temporary income tax to deal with the immediate fiscal emergency our state faces," Quinn says.

The income tax increase is expected to raise close to $7 billion dollars a year, and the legislation caps some state spending.

But the new revenue alone won't close Illinois' gaping budget hole, and state Republicans blast majority Democrats for not doing more to cut spending.

In the heated floor debate, Republican State Senator Kyle McCarter said the tax hike will kill jobs and cripple businesses in Illinois... with one exception.

"Here's an investment tip for you: put your money in moving vans.  They'll be in high demand," he said.

New Wisconsin Governor Scott Walker wants to revive that state's old tourism campaign, "Escape to Wisconsin," but instead of encouraging neighboring Illinois residents to come up for weekend getaways, he's targeting businesses who want to escape the big tax increase.

"Lots of luck to them," says the Illinois governor, "but that's not going to happen." Quinn notes that Wisconsin tax rates are still higher than those of his state.

But that doesn't make this whopping tax increase of almost 67% any easier for Illinois residents to swallow, even among those waiting in line to meet Quinn at an open house at the Governor's mansion after his inauguration earlier this week.

"I think there's a lot that needs to be cleaned up first, then we can talk about raising the income tax, says Anita Strautmanis of the Chicago suburb of Deerfield. She wants to see spending cuts and fixes for the state's pension problems.

As for this tax increase being temporary? "Ummmm, I don't believe that.  Once you raise something it doesn't go down."

But others are willing to pay more to end Illinois' perennial budget crises, including Southern Illinoisian Billie Henderson.

"I think that would generate a lot of revenue for Illinois. And I think, you know, we've been in trouble for so long I think it's our responsibility to help get the state back on it's feet," she says.

Illinois' income tax increase is retroactive to January first, so by the time the governor signs it and the revenue department begins collecting, that first paycheck deduction could be quite large. Copyright 2011 National Public Radio.