Tax Relief

State OKs finances, tax relief | Republic Occasions

It may have taken into the early hours of Saturday morning, but Illinois lawmakers finally passed a $46.5 billion budget for fiscal year 2023 as well as a $4.8 billion tax relief package.

After 3 am Saturday in the Senate and 5:30 am in the House, lawmakers approved House Bill 900 appropriating funding, House Bill 4700 as what is called the budget implementation bill and Senate Bill 157 laying out the tax relief proposal and revenue-related measures .

Final budget bills are typically among the last bills lawmakers pass before adjourning a legislative session. This year was no different. What was different was the fact the session ended in early April rather than the end of May.

The shortened schedule was largely due to this year’s election calendar being pushed back because of delays in releasing 2020 US Census data, which in turn caused a delay in the redistricting process.

As a result, this year’s primary elections were pushed back to June 28.

The shortened legislative session gives lawmakers and other candidates for state offices more time to campaign ahead of the primaries.

The spending plans passed both chambers without Republican support, while the tax relief proposal passed with all but a handful of lawmakers supporting it between the two chambers.

gov. JB Pritzker hailed this legislation as “enormous and historic” for the people of Illinois, touting, “gas, grocery and property tax relief, more support for local government than ever before, a massive improvement in staffing for our nursing home residents, short and long long-term debt reduction, and a balanced budget for the fourth year in a row.”

The 1-percent tax on groceries purchased in Illinois will be lifted for the entirety of the new fiscal year.

Nursing homes will get a major boost in Medicare-based funding to improve staffing levels – including higher pay for certified nursing assistants, a role that has been difficult to keep staffed.

Tax relief plan

Under the tax relief plan, $50 checks would be sent to Illinoisans earning less than $200,000 annually for single filers and $100 checks for those filing jointly and earning less than $400,000. Families would also receive $100 per dependent up to three.

It would also permanently expand the earned income tax credit to 20 percent of the federal credit, up from 18 percent, at a cost of roughly $100 million per year. It would extend EITC eligibility to non-citizens who have an individual taxpayer identification number rather than a Social Security number.

It also calls for doubling the property tax rebate to qualifying homeowners, up to $300 per household. From Aug. 5-14, Illinoisans will see a suspension on sales tax on qualifying back-to-school items under the budget.

While many Democrats are phrasing the tax relief package – Sen. Michael Hastings (D-Frankfort) called it “probably one of the largest savings to taxpayers that we’ve seen in the last decade” – some local Republicans said they do not believe it will do enough.

Republicans charged that the Democrats’ budget conveniently scheduled much of the tax relief to expire after the election season.

State Sen. Terri Bryant (R-Murphysboro) called it an election year “gimmick.”

“Since I entered the General Assembly, the state’s budget has increased by nearly 30 percent. Each year, I continue to watch Illinois Democrats permanently spend more and more while the residents of our state are crushed by out-of-control taxes,” she said. “Members of the General Assembly had a golden opportunity to provide struggling families with long-lasting relief. Rather than providing those families with permanent tax relief, the majority party passed gimmick relief with a post-election expiration date.”

Even though she spoke publicly about wanting more “permanent” tax relief, Bryant did vote in favor of the tax relief portion of the plan. She voted against the state spending plan.

The plan will also suspend a 2-3 cent motor fuel tax increase for six months.

This is something State Rep. David Friess (R-Red Bud) specifically mentioned.

“They will claim to save you money at the pump by delaying the scheduled gas increase,” Friess said. “Conveniently, this tax increase will go back into effect just after the fall elections.”

The motor fuel tax is the main funding source for road construction projects, so revenues lost from it would be replaced from other state funds.

Waterloo resident Paul Schimpf, Republican candidate for governor and a former state senator for the 58th Senate District, said he is “grateful” for this, yet believes it is time for what he called “real tax reform.”

“While I am grateful that the Illinois Motor Fuel Tax will temporarily be frozen while still ensuring the Road Fund receives the resources necessary to make continued repairs and upgrades to the vital transportation structure of Illinois, the people of this state deserve so much more,” he said. “To renew Illinois … it’s going to take real tax reform that doesn’t hurt our residents, businesses or quality of life; it’s going to take real solutions that lower costs; and it’s going to take a governor who isn’t afraid to go against the status quo to help Illinoisans.”

Schimpf went on to champion a “No Tax on Tax” constitutional amendment and said Illinois needs more “forward thinking” solutions.

Other details

Under the FY2023 spending plan, the portion of the state’s income tax going to local governments would increase from 6.06 percent to 6.16 percent.

Sims said the budget also included an increase of $80 million in the Criminal Justice Information Authority, $90 million to fund three state police cadet classes to provide an additional 300 state troopers, $33 million for a law enforcement camera grant program and $10 million for a newly created law enforcement officer retention pilot program.

The budget also directed an investment of $235 million in federal American Rescue Plan Act funding to the Reimagine Public Safety Act aimed at early crime intervention.

It also provides for the statutorily required $350 million in additional funding for public schools through the Evidence Based Funding formula that was originally adopted in 2017.

The Illinois State Board of Education uses the Evidence Based Funding formula to distribute funding based on need.

The budget directs $1 billion to the state’s “rainy day” fund, which had been spent down to essentially nothing during a two-year budget impasse between former Gov. Bruce Rauner, a Republican, and legislative Democrat.

Another $929 million was dedicated to paying back interfund borrowing.

Sims brought up the impasse during floor debate to contrast the current budget from the two-year period that crippled state finances.

“(The budget) is built on and based on revenues that were higher than expected in the current fiscal year which will allow us to do some very innovative and positive things for the people of the state of Illinois,” Sims said.

Rep. Greg Harris (D-Chicago) also invoked the impasse during his floor speech in praising the budget.

“It’s a responsible budget. I know we’re gonna hear a lot of speeches. I know we’re gonna hear a lot of stunts,” he said. “But for the people of Illinois, Democrats are delivering, Democrats are balancing the budget. Credit rating agencies are noting it, the civic organizations are noting it.”

The stronger-than-expected revenue performance created a surplus for the current year and led to increased projections for the upcoming fiscal year that begins July 1.

That was due in part to pandemic-triggered shifts in consumer behaviors that led to more spending on taxable goods than services which are not taxed in the state, increased federal unemployment benefits which are taxed at the state level and increased tax revenue due to higher- priced consumer goods relating to inflation.

Those and other factors led to higher performance of sales tax and both personal and corporate income tax revenues, according to a presentation last month from the Illinois Department of Revenue.

Rep. Tom Demmer (R-Dixon), who is running for treasurer, said the pandemic-related revenue windfalls have allowed Democrats to grow spending faster than year-after-year revenues.

“And when this one-time revenue dries up, the only thing you’ll know how to do is go back and raise taxes yet again,” he said.

Friess agreed.

“They will claim that this budget is balanced and saves the taxpayers millions of dollars,” he said. “Once again, these are falsehoods. The revenue for this budget comes from two sources: federal tax dollars received to fight COVID and rapidly rising inflation wreaking havoc on sales tax. Once this funding is gone, so will the legs of this budget.”

Previous debt relief

A surplus from the current fiscal year funded a large portion of some of the taxpayer relief measures and was also the source for an earlier debt reduction plan passed last month.

That plan included $1.4 billion to pay down state debts and allocated $2.7 billion in federal funds to partially pay down a $4.5 billion hole in the Unemployment Insurance Trust Fund.

That debt repayment action directed nearly $900 million from a current-year budget surplus to paying down past-due group health insurance bills, as well as $300 million in added pension payments and $230 million to pay off the debts of the state’s College Illinois program.

The budget would add another $200 million to the pension fund beyond statutory requirements, bringing the total added investment this session up to $500 million.

Still, the proposal left an unaddressed $1.8 billion hole in the Unemployment Trust Fund, and lawmakers did not take major action to address it. They did, however, push back major insurance premium hikes on employers and benefit cuts to people collecting unemployment until January to allow more time for negotiation.

Reporting courtesy of Capitol News Illinois, with some additions from the Republic-Times.

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