Service, employer taxes added to stalled Senate ‘grand bargain’

SHARE Service, employer taxes added to stalled Senate ‘grand bargain’

Senate President John Cullerton and Senate Republican Minority Leader Christine Radogno met with the Sun-Times Editorial Board last week. File Photo. | Rich Hein/Sun-Times

SPRINGFIELD — The passage of an ambitious Illinois Senate “grand bargain” package of bills hit a speed bump on Tuesday as Senate leaders opted to take in further input — while also adding new taxes to a revenue bill, including an excise tax on services and a tax on employers based on payroll.

The additions show there are still plenty of changes that may be made to the evolving package of 13 bills before it hits the floor.

State Sen. Toi Hutchinson, D-Chicago, called a new blend of $6.5 billion in taxes “tough to sell” but crucial to ending the budget impasse. She warned that legislators will have to make hard political choices.

“There a lot of people who will find parts of this package not good for them, not good individually. There are a lot of people who will find that, but I think the majority of us understand that the budget impasse is worse,” Hutchinson, chairman of the Senate Revenue Committee said. “The state is burning right now and if you have another idea for how to fix this, please bring it because we need all the help we can get.”

Heavy opposition from business groups prompted the removal of a penny-per-ounce tax on sugary drinks — showing the influence of opponents of the bill package.

“We didn’t want anything that would unnecessarily tank an entire package because, again, the stakes are pretty high,” Hutchinson said.

The revenue bill includes a bump from the personal income tax from 3.75 percent to 4.99 percent. The bill originally had the rate set at 4.95, but Senate leaders were careful not to limit it. That increase is expected to generate more than $4 billion annually.

The bill also includes an increase in the corporate income tax from 5.25 percent to 7 percent — estimated to generate $577 million annually. It also eliminates three corporate tax loopholes, which could generate $145 million a year, according to a Senate analysis.

New additions include a “business opportunity tax” ranging from an annual fee of $225, to $15,000 based on payroll. That is estimated to generate $750 million annually.

A new tax on services — including dry cleaning and laundry, storage of cars, boats and property, landscaping, repair and maintenance of personal property, such as cars, and amusement services — could bring in $413 million. That tax also includes an extension of an excise tax on cable and satellite services.

The excise tax is modeled after Wisconsin, where there are 14 services taxed. An analysis by the General Assembly’s Commission on Government Forecasting & Accountability found Wisconsin’s service taxes will bring in an estimated $672 million in its fiscal year 2018.

Illinois Senate President John Cullerton and Illinois Senate Republican Leader Christine Radogno last week said they were hoping to get the package to a vote on the Senate floor by Wednesday. But the leaders instead chose to hear subject matter hearings on the bills on Tuesday — slowing that process. Members met later Tuesday to privately discuss any concerns over the package.

“We’re not here to trick anybody. We really do have the good of the state at heart,” Radogno said at a Senate executive committee hearing, where both leaders said a vote wouldn’t be taken on the package of 13 bills, which includes everything from a temporary property tax freeze, to a school funding fix and changes to workers’ compensation.

“At the end of the day, not everyone is going to love this. There’s parts I’m not wild about,” Radogno said. “I’m sure there are parts the Senate president is not wild about and there will be some very difficult votes.”

But the Lemont Republican stressed their deal — the one she said she’s “lived and breathed” and even “dreamed” about for two months — is the only comprehensive plan in town.

“If we continue without a plan in place, we go deeper into the hole. We need to stop divvying, or stop the bleeding or whatever saying you want to use and then look at a plan that in the most fair way possible, moves us forward,” Radogno said. “That’s our agenda.”

Cullerton said the delay in committee was to give more time for testimony, and for members to discuss concerns in caucus.

The leaders will have to convince legislators who are leery of a tax hike, let alone new taxes for businesses and for services. They also face opposition from business groups, such as the Illinois Chamber of Commerce, which said Tuesday it opposes all of the package — but specifically dislikes the workers’ compensation and revenue bills. Other opponents of the revenue package include the Illinois Manufacturers’ Association and the Taxpayers Federation of Illinois. But the groups in committee applauded senators for their work, calling the package a positive step, albeit one that needs further review.

Radogno and Cullerton began crafting the package last month after talks between Gov. Bruce Rauner and Illinois House Speaker Michael Madigan came to a screeching halt.

The package of bills — including a minimum wage hike, pension reform and a gaming bill — also includes appropriations to help fund human services and higher education, which were cut off from funding when a partial budget expired on Jan. 1. A term limits constitutional amendment is also part of the package. It first included all lawmakers and statewide officers, but then evolved to solely legislative leaders.

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