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Business Group Asks Illinois Gov For MORE Taxes

The Civic Federation, a non-partisan watchdog group, issued a report Thursday arguing the Illinois will not be able to eliminate $6 billion in unpaid bills with spending cuts alone, as Republican Gov. Bruce Rauner has proposed.

While acknowledging the need for spending restraint, the report asserts that, “the Federation cannot support spending reductions that balance the budget on paper but could actually worsen the State’s financial condition if not realized.” (RELATED: Gov. Rauner Faces New Challenge in ‘Fair Share’ Fight)

In place of Rauner’s steep cuts, the group suggests imposing modest spending controls while raising new revenue by partially restoring a temporary income tax increase that expired in January, ending tax breaks for retirees and removing sales tax exemptions for various products.

Under the Federation’s plan, the individual income tax rate would rise from 3.75 percent to 4.25 percent, and the corporate rate would increase from 5.25 percent to 6 percent. In addition, the state would begin collecting taxes from individuals with more than $50,000 in retirement income, excluding Social Security.

Rauner offered a different take on the state’s fiscal crisis in his annual budget address, telling lawmakers, “This huge deficit is the result of years of bad decisions, sleight-of-hand budgeting, and giveaways we could not afford. It is NOT the result of decreasing tax rates.” (RELATED: The Reason Why Rauner Left Unions Out of His Budget Speech)

Rauner explained that special interest carve outs put in place over the course of decades have left Illinois with a wasteful and inefficient budget, and that new revenue would do nothing to fix the state’s fundamentally broken system.

“Before we ask the people of Illinois to pay more to fund state government,” he argued. “We must ensure taxpayers are getting value for their money.”

The Civic Foundation, however, claims many of the cuts Rauner is proposing—such as a $2.2 billion reduction in pension contributions and a 50 percent cut in the share of income taxes shared with local governments—are either implausible or counterproductive.

The pension cuts, for instance, “[are] likely to face legal challenges,” which would, minimally, delay the projected savings. Reduced revenue sharing, meanwhile, could actually exacerbate the fiscal situation by inhibiting economic growth at the local level. (RELATED: Chicago Gets Tough Love From Rauner)

In response to the report, Rauner spokeswoman Catherine Kelly told Crain’s Chicago Business the governor might be willing to consider tax increases, but only if lawmakers agree to implement provisions of his “turnaround agenda,” such as right-to-work laws and term limits.

“New revenue cannot be discussed until we address the underlying structural issues that have landed us here in the first place,” she said.

The Democrat-dominated General Assembly, however, does not appear particularly interested in working with the new GOP governor.

House Speaker Michael Madigan sought to embarrass Rauner by holding a vote Wednesday on nearly $2 billion in cuts to human services spending that the governor has proposed, the Chicago Tribune reports.

Faced with a choice between supporting the unpopular measure and appearing to abandon Rauner’s agenda, Republicans prudently chose to vote “present” en masse, leaving the measure without a single assenting vote.

Follow Peter Fricke on Twitter

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