WASHINGTON – With Congress working on overhauling the federal income tax system – the House passed its version on Thursday with a Senate vote still to come – what seems almost certain for Illinois taxpayers is the loss of a deduction for state income taxes.
That’s because both the House and Senate are aiming to eliminate that tax break – which means a lot to taxpayers in states with higher state taxes – Illinois, New York, California and New Jersey.
How an individual or household fares under the GOP tax plans once they are finalized will depend on a number of factors. While the standard deduction will double, some tax breaks will be repealed.
The Senate Finance Committee on Thursday was finalizing its tax overhaul bill while the House, on a 227-205 roll call, passed the “Tax Cuts and Jobs Act.” The two chambers eventually have to agree on one bill to send to President Donald Trump.
That means the House will be voting again – so Thursday represents a chapter in this unfolding tax story, not the book.
More about that vote and the winding tax road ahead:
*The House vote was mainly on partisan lines. All the Democrats voted no. But 13 Republicans bolted from President Donald Trump and their GOP House leadership. That breakdown of the 13 Republican no votes is instructive: five are from New York, four from New Jersey and three from California. The 13th no vote was from an anti-tax North Carolina Republican.
*All six Illinois Republicans were yes votes.
Rep. Robin Kelly D-Ill., took the highly unusual step of calling out her Illinois GOP colleagues by name.
In a statement, Kelly said she was “extremely disappointed” in GOP Illinois Reps. Mike Bost, Rodney Davis, Randy Hultgren, Adam Kinzinger, Darin LaHood, Peter Roskam and John Shimkus.
“I believe that every Illinois family who sees their taxes go up deserves to know exactly who is responsible: their Republican representatives in Congress – Roskam, Bost, Davis, Hultgren, Shimkus, Kinzinger and LaHood,” she said.
*Republican Gov. Bruce Rauner continues to refuse to weigh in on matters before Congress with enormous bearing on Illinois.
Rauner is up for re-election next year and may face a GOP primary challenge from the right. In a general election, however, he needs moderate GOP and swing Democratic votes.
Speaking to reporters in Chicago, Rauner climbed on a rhetorical fence.
“Federal tax reform is long overdue. We need to lower the tax burden on the federal level. We also have to lower the tax burden at the state level. And my focus is obviously here at the state level.”
That’s a reference to the Democrats who control the Illinois General Assembly who voted to boost the individual Illinois income tax rate to 4.95 percent, effective last July.
“I’m not going to weigh into the detail that’s being debated in Congress right now at on the federal level. I have shared a few thoughts with federal officials, but I’m not going to weigh in to the media on this,” Rauner said.
In a letter to Rauner dated Thursday, Illinois Democratic Sens. Dick Durbin and Tammy Duckworth said, “We write once again to solicit your feedback on how the Republican tax plans in the House and Senate would impact Illinois and believe the residents of Illinois deserve to hear from their governor on how each proposal would impact our state.”
*Roskam, who is a power on the tax-writing Ways and Means Committee, told the Sun-Times that a priority for him is fending off attempts by fellow Republicans in the House and Senate to repeal or erode the current deduction for the payment of property taxes.
The House bill allows for a deduction of up to $10,000 for property taxes.
In the Chicago area, property taxes are a politically explosive issue.
“In property taxes, there is no relationship to your ability to pay,” Roskam said, “so I fought hard to maintain the property tax deduction.”
Roskam said the state income tax deduction is not needed if the “totality of all the changes that are proposed in the House bill” are calculated.
*Democratic governors and mayors, including Rahm Emanuel, have joined congressional Democrats in opposing the GOP tax overhaul plan. A centerpiece of the House and Senate plans is to lower the corporate tax rate from 35 percent to 20 percent.
Said Emanuel in a statement, “The Republicans’ plan to give tax breaks to corporations and the wealthy at the expense of many hardworking American families, students and seniors is a bad deal for Chicago and bad policy for the country. Congress should lower taxes for middle-class Chicagoans, not raise them.”