Pritzker looks beyond now-defeated income tax amendment: ‘There will be cuts. And they will be painful’

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Gov. J.B. Pritzker has said Illinois had three choices for dealing with its massive deficits: Hike taxes across the board, make spending cuts that would include education and public safety, or amend the state constitution to allow a graduated income tax.

The governor ticked off those options again Wednesday when he spoke to reporters in the aftermath of Tuesday’s election. Only this time, the third option had been taken off the table after voters rejected Pritzker’s proposed graduated income tax amendment. So Pritzker said he would soon be talking to legislative leaders about a new path for dealing with Illinois’ finances.

“We now sit at a crossroads,” Pritzker said. “Our state finances still require fundamental structural change.”

He added, “There will be cuts. And they will be painful.”

Incomplete results Wednesday afternoon showed 55.1% of Illinoisans voted against the graduated income tax amendment and 44.9% voted for it with 97.8% of precincts reporting. State officials also indicated 400,000 mail-in ballots may still be outstanding. The amendment needed a “yes” vote either on the majority of all ballots or from 60% of people who voted on it.

Advocates of the amendment, including Pritzker, have acknowledged its defeat.

Lt. Gov. Juliana Stratton warned in September that if voters rejected Illinois’ graduated income tax proposal, the legislature would be compelled to consider a 20% increase for all taxpayers. Money from the graduated income tax would have been used to tackle a state deficit of around $6 billion.

“We all know that our middle-and lower-income families cannot withstand a 20% tax increase, and it will only serve to deepen the dramatic inequities that we already see across the state,” Stratton had said.

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The comment drew heat from House Minority Leader Jim Durkin, R-Western Springs, who accused Democrats of “intimidation and scare tactics” and threatening a tax increase “with a smile on their face.”

Faced with the reality of the amendment’s defeat, Pritzker Wednesday said he would focus first on spending cuts. But he said, “There is a point in which there’s no doubt that, without revenue, some of those cuts will start to hit things that do affect working families.”

“Do we really want to cut education funding in this state?” Pritzker asked. “I don’t think so.”

Moody’s Investors Service said the amendment’s defeat means Illinois might raise taxes, and it said raising the flat income tax from 4.95% to 5.65% would generate $3 billion. It also said the amendment’s failure “increases the probability of spending cuts.”

David Merriman, senior scholar at the University of Illinois’ Institute of Government and Public Affairs, said Wednesday that Illinois should rethink its “entire revenue system” and form a tax study commission. He also said the state could expand the sales tax or pursue a more progressive income tax through deductions and exemptions. On the other side of the ledger, he said “I’m sure that there are efficiencies that can be made,” but it’s not realistic for Illinois to try to cut its way out of the problem.

“You won’t find cuts that would do anything like the magnitude that we need to balance the budget,” Merriman said.