Illinois tax increase: reactions and ramifications

A worker from Illinois Marine Towing keeps watch from the deck of the Windy City as it pushes a barge into downtown in Chicago, Ill.

TEXT OF STORY

JEREMY HOBSON: While you were sleeping state legislators in the Land of Lincoln were passing a 66 percent income tax increase. Democrats in the state wanted to get it done before Republicans take control there. Illinois faces a $15 billion hole in its state budget. Corporate taxes will also go up.

Let's go now to the Illinois state capitol where Amanda Vinicky is standing by. She's statehouse bureau chief for WUIS Illinois Public Media. Well, Amanda, bring us up to date on what happened in the wee hours of the morning and what it means for the people of Illinois.

AMANDA VINICKY: Well the tax increase package that passed basically means that if you're making $40,000 a year, you're going to owe the state another $800. Democrats say they had no choice, there was no way to cut out such a dismal budget situation. The state's racked up approximately $15 billion deficit. Even the governor's Budget Director warns that the state's in jeopardy of getting its bond rating downgraded to junk status. You can hear the emotion in Democratic representative David Miller's voice when he talked about the politics behind taking such a tough vote.

DAVID MILLER: Everybody wants to go to heaven but nobody wants to die. It is time for us to live up to our responsibility, to make sure that people in the state of Illinois are taken care of.

HOBSON: Wow, very emotional stuff there in Illinois. Amanda, standby. Let's bring in our Washington Bureau Chief John Dimsdale -- John, this is far from an Illinois-specific problem. States all across the country are facing big budget shortfalls and trying to figure out their way out of them.

JOHN DIMSDALE: That's right. One think tank estimates states together face a $140 billion budget short fall this year. California for example is looking at $25 billion in red ink. Texas and New Jersey both have to find $10 billion to balance their budgets. New Jersey Governor Chris Christie has shown he's willing to take on state employee unions there and cut salaries and pension benefits.

HOBSON: And John is there anything Washington can or will do to help states?

DIMSDALE: Well, that 2009 stimulus package which had a lot of help for states is running out. And given how bad federal finances are, Congress says there's just no more. For one thing, federal help benefits states that have been big spenders and punishes those states that have taken the fiscally responsible route. So, states and even cities facing bankruptcy are on their own. That response from here is going to be similar to when New York City went to President Gerald Ford in 1975 with their hat in hand. And the Daily News headline was "Ford to City ... Drop Dead."

HOBSON: Yeah a lot of people remember that. Let's get back to Amanda Vinicky in Springfield, Illinois. Amanda, what happens next there?

VINICKY: Well first of all the Governor Pat Quinn has to sign the package into law which he is expected to do. But then Republicans say they'll immediately begin working to repeal the hike. Even the people who support it say Illinois isn't yet out of the woods. The business community is very riled up. The tax package also increases the corporate tax rate on them, leading on Republican Senator to offer this investment tip, "Put money into moving vans."

HOBSON: Indeed. Amanda Vinicky, Statehouse Bureau Chief for Illinois Public Radio. And Marketplace's Washington Bureau Chief John Dimsdale, thank you both.

DIMSDALE: Thank you

VINICKY: Thank you.

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