The House and Senate, in the waning hours of the 96th Session of the General Assembly, voted to increase taxes on both personal and corporate income in Illinois. The new tax plan will raise approximately $6 billion that will allow the state to pay its bills, maintain vital state services, repair the state’s credit rating, create jobs, and put Illinois on a course for fiscal stability. Illinois now joins 30 other states which have enacted revenue measures to address the effects of the recession.
Effective January 1, 2011, personal income tax rises from three percent to five percent and the corporate tax moves from 4.8 percent to seven percent. For the most part, the new taxes are temporary. Both tax rates go down in 2015 with a second reduction coming in 2025. The 2025 tax rates will be 3.5% for individuals and 4.9% for corporations. In addition to the temporary nature of the tax increases, the bill includes strict spending caps that will require the state to take into account available revenue when making decisions about expenditures.
The votes in both chambers were close—60 to 57 in the House, and 30 to 29 in the Senate. Everyone knows it is hard to vote for a tax increase, but Illinois has needed to address its structural deficit for more than a decade. Therefore, we, and others across the state in the Responsible Budget Coalition, are very grateful to those legislators who demonstrated courage and leadership with their affirmative votes.
Several Democrats joined all the Republicans in both chambers in voting against the tax increase bill. The irony is that most of the new revenue will be used to pay our bills and stop “borrowing” money from service providers in communities all across Illinois—things that will benefit everyone.
There’s more work to be done—of course—to solve our state’s financial problems, but for now, take a moment to feel good about your contribution to the important step we’ve just taken. And, then, stay tuned for information about our next steps!