Illinois House OKs income tax hike, spending plan; Rauner vows vetoes

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“While no one could say this was an easy decision, it was the right decision,” House Speaker Mike Madigan said in a statement after votes approving tax increases and a spending bill.

SPRINGFIELD — With the state on the cusp of a catastrophic credit downgrade, the Illinois House on Sunday voted to end the historic budget drought by passing a long-awaited spending plan and seeking to pay for it by hiking the income tax rate to 4.95 percent.

But nothing is ever easy when it comes to patching up a political feud between two of the state’s most powerful men: Democratic Illinois House Speaker Michael Madigan and Republican Gov. Bruce Rauner.

Rauner’s administration on Sunday night said he’d veto both measures as soon as they hit his desk, should the Illinois Senate concur with the House on Monday. The administration also advised that members of the General Assembly “shouldn’t go anywhere.”

Soon after the votes, Rauner vowed to veto “Mike Madigan’s permanent 32 percent tax hike,” dubbing it “more of the same.” The Rauner-led Illinois Republican Party, too, quickly labeled the speaker “#JunkMadigan” in a tweet.

But Madigan heralded their passage as the “right decision,” while vowing that there’s more work to do.

The revenue measure passed 72-45, with 15 Republicans voting to approve it — a reflection of the mounting frustration and pressure of a stalemate that has decimated the state.

The spending plan garnered more votes — with 81 voting to approve it. Both measures now head to the Senate, where they’ll need 36 votes.

An amendment filed to the spending plan included some sticky changes, reflective of Democratic leaders’ desire to see a school-funding formula bill signed. One change would block money for schools unless the governor signs an “evidence-based model” — effectively holding districts harmless for their current funding and building off that to reach adequacy targets.

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Rauner’s veto threat is no surprise. He has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions. And his veto message pins the hike entirely on the speaker — whom he’s spent millions against in legislative campaigns and ads.

“Illinois families don’t deserve to have more of the hard-earned money taken from them when the Legislature has done little to restore confidence in government or grow jobs,” Rauner said in a statement.

The tax bill passed with some essential Republican support — it needed 71 votes. But Illinois House Republican Leader Jim Durkin questioned how it will address the state’s $14 billion bill backlog. Durkin is seeking to get Rauner the “balanced budget package,” he wants, which includes spending reductions and “meaningful reforms.”

“I am disappointed that we’re taking this up at this moment when there has been significant, significant progress to address the priorities of the governor and also the priorities of this caucus,” Durkin said.

There are, of course, political ramifications to supporting a tax hike, on both sides of the aisle. Some House Democrats were expected to vote no to try to shield themselves from Illinois Republican Party attacks in next year’s election.

But some House Republicans — knowing they’d too be targeted for supporting it — said there’s no other choice.

“For me right here today, this is the sword that I’m willing to die on,” state Rep. Michael Unes, R-East Peoria said. “And if it costs me my seat, so be it.”

State Rep. David Harris was among the Republicans who supported the bill, while also urging the governor to sign the revenue and spending bills if passed: “Have the courage to do what is right and bring this madness to an end.”

“I was not elected as a state legislator to help preside over the financial destruction of this great state,” Harris said. “I respect my colleagues who are voting no. But to me, enough is enough.”

Others sought to see more agreement on reforms before dealing with a revenue bill. State Rep. Peter Breen, R-Lombard, accused House Democrats of giving up on good-faith negotiations that had been going on regarding a budget and reform package.

“This is essentially a blackmail budget. We are here today because reform negotiations, which were negotiated in good faith, are now being cut off because there’s nothing more these folks can do,” Breen said. “We can fix this impasse. This is not the right way to do it.”

The measure would hike the individual income tax rate from 3.75 percent to 4.95 percent and the corporate income tax rate from 5.25 percent to 7 percent.

Changes made by House Democrats from the original Senate bill include the removal of streaming and satellite fees. The House version also closes corporate tax loopholes, increases the earned income tax credit, and restores the research and development and manufacturers’ tax credit to attract more businesses.

House Democrats on Sunday also made changes to the spending plan. The plan spends about $395 million less than a measure which advanced with bipartisan support on Friday.

July 1 marked the beginning of a new fiscal year, and there remains a threat that the major credit agencies will drop the state to “junk” status without a budget.

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