Doomsday Tax Predictions for Illinois

State watchdog group calls for 'historical' increase in personal income tax

By JENEL NELS

Updated 11:27 AM CST, Mon, Feb 22, 2010

In order to crawl from beneath crushing debt and reach fiscal solvency, Illinois legislators must choose from a series of options that range from bad to worse, according to a prominent watchdog group.

The Civic Federation wants to launch an intervention that includes significant budget cuts and the largest tax increase package in Illinois history, all in an effort to save the state from a

$12.8 billion budget deficit.

“Doomsday is here for the state of Illinois,” said Laurence Msall, Civic Federation President, to the Sun-Times.

The group says it would support a state income tax increase from 3 percent to 5 percent. It also recommends the state tax retirees’ pension and Social Security checks be taxed for the first time at the same rate as workers’ paychecks. They want another $1 increase on a pack of cigarettes and to eliminate $181 million in corporate tax breaks.

If implemented, the Federation's recommendations could shave off $8 billion, but there is a catch.



In order to implement those increases, the Civic Federation says unions should pay more toward their pensions and health care -- but the unions aren't interested.

“Illinois’ fiscal crisis has been many years in the making. It was caused by more than 30 years of pension underfunding and many years of spending unfettered by the state’s shrinking revenue resources,” said Msall.

The group’s plan would help alleviate the deficit by 2012, they say.

The state’s red ink has already caused a backlog of unpaid bills to public universities and schools, transit systems and social services.

“The Civic Federation does not enjoy advocating a significant tax increase in the middle of a difficult recession. However, continuing to do nothing would be by far a worse option,” said the Civic Federation in a statement on the group’s website.