The mammoth budget blueprint under consideration in the Illinois Senate changed shape yet again Tuesday, with lawmakers floating the idea of applying a higher state sales tax to food and drugs.
The change allows backers to shelve a proposed "opportunity tax" that would charge companies for the "privilege" of doing business in the state. That ran into opposition from business groups. But the broad nature of the sales tax expansion is likely to spawn arguments that it hits hardest those least able to afford the increase.
Some background: the state sales tax on most goods is 6.25 percent. The rate, however, is just 1 percent for many food, drugs and medical supplies — think stuff bought at the grocery store. It’s higher in places where local governments can impose their own taxes. In Cook County, for example, shoppers pay an additional 1.25 percent tax to the Regional Transportation Authority for a 2.25 percent total rate.
Here’s how the Senate plan would work: The overall sales tax rate of 6.25 percent would drop to 5.75 percent, but it would be applied to a broader range of goods including food, drugs and medical supplies. Cutting the overall sales tax by half a percentage point would drop the total sales tax in Chicago to 9.75 percent. In addition, services would be taxed at 5.75 percent, including car repairs, landscaping, laundry, and cable and satellite.
The complicated sales tax changes illustrate the Senate’s struggle to craft a plan that strikes enough balance between raising taxes and cutting costs on businesses to win votes. The Senate effort comes as Republican Gov. Bruce Rauner and Democratic lawmakers are in the throes of unprecedented gridlock that’s left state government without a comprehensive spending plan since July 2015.
Senate leaders, who have held out the prospect that their massive plan would be voted on several times already, say they’re pushing for a vote this week. They acknowledge it’s unlikely to end up as law even if it escapes the Senate, but they hope it will prove that bipartisan compromise is possible.
Rauner says final budget package must have sufficient ‘structural change’ to gain his support Rick Pearson, Kim Geiger and Monique Garcia
Republican Gov. Bruce Rauner said Wednesday that he will offer state lawmakers this month a budget proposal in the same format that the Democratic-led General Assembly rejected last year — either work with him on crafting a balanced spending plan or give him more power to make cuts on his own.
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Republican Gov. Bruce Rauner said Wednesday that he will offer state lawmakers this month a budget proposal in the same format that the Democratic-led General Assembly rejected last year — either work with him on crafting a balanced spending plan or give him more power to make cuts on his own.
… (Rick Pearson, Kim Geiger and Monique Garcia)
The sales tax increase combined with a measure to raise the personal income tax rate from 3.75 percent to 4.99 percent would bring in an estimated $6.5 billion a year for state coffers. Facing a bill backlog expected to soon hit $15 billion, it’s money the state could use to bring its books closer to balance, but politicians on both sides of the aisle are wary of raising taxes.
Meanwhile, Republicans have argued that provisions of the budget proposal aimed at propping up businesses don’t go far enough to make their votes for a tax increase worthwhile. They’ve taken particular issue with a measure to scale back costs of the state’s workers’ compensation program, saying it contains only minor nips and tucks. Some also have pushed for major cuts in government spending, saying Illinois has a bad habit of relying on tax increases instead of spending reductions.
Supporters say it’s past time for lawmakers to make some hard decisions, noting that universities, social service programs, prisons and veterans homes are scraping by now without any funding from the state.
"Members still have some trepidations about the impact it’s going to have on them personally," said Sen. Donne Trotter, D-Chicago. "That’s what we do. We take hard votes down here, and these are hard times, so it necessitates us doing some things that we wouldn’t do under normal circumstances. But I believe the times have pushed us to that point, that something has to be done, and this is one of the ways to do it."
The Senate package also calls for a major expansion of gambling, including a Chicago casino and five others. Local property taxes would be frozen for two years, but schools would get the ability to scale back state requirements such as physical education and driver’s education courses to cut costs. School districts also would have more power to outsource things such as janitorial services — a point of contention for organized labor, which is usually aligned with the Democrats.
Other aspects would give local governments more control over consolidating various taxing bodies, and curb retirement benefits doled out under the state’s employee pension system. A plan to change how the state distributes money to schools is still being worked on but could surface this week, further complicating already difficult negotiations.
Even if the package should pass the Senate — there’s a trigger provision that says if one of the dozen bills fails, all of them fail — the prospects of it becoming law are a long shot. House Democrats led by Speaker Michael Madigan have indicated they are likely to go their own way on a budget plan, and Rauner himself has said the plan might not make all the economic changes he’s made a condition of a larger budget deal.
Lawmakers on both sides of the aisle, however, say they’ve got to start somewhere.
"I think anything that we pass is, again, a beginning. I don’t think that it’s necessarily the final product," said Sen. Pamela Althoff, R-McHenry. "We’re going to have weigh in from the governor, we’re going to have weigh in from the House. But I think we’re committed to having some type of a framework to begin those discussions and finally have a budget, certainly before the end of session. Hopefully before the end of session."
Chicago Tribune’s Hal Dardick contributed form Chicago.
mcgarcia@chicagotribune.com
hbemiller@chicagotribune.com
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