| SPRINGFIELD, Ill.
SPRINGFIELD, Ill. Feb 20 An Illinois lawmaker
proposed on Wednesday making a personal income tax increase
permanent instead of allowing it to partially expire in 2015, a
move many economists have long considered necessary to help
resolve the state's fiscal crisis.
Democratic state Representative Lou Lang, a deputy majority
leader of the Illinois House, introduced a bill that called for
making the tax increase permanent as part of an overall fix to
the nation's most underfunded state pension systems.
The system is only 39 percent funded when 80 percent is
Soon after the 2010 mid-term election, majority Democrats in
Illinois pushed through the tax increases in a lame duck session
of the legislature.
The state's flat personal income tax rate was hiked to 5
percent from 3 percent (a 67 percent increase), but will retreat
to 3.85 percent on Jan. 1, 2015. The corporate tax rate, which
was raised to 7 percent (a 46 percent increase), will drop to
5.25 percent in 2015.
While income tax revenue grew by $5.4 billion in the year
ending June 30, 2012, most of that was devoured by burgeoning
payments to the state's pension systems and the state's fiscal
condition has not improved.
A report last year by a task force headed by former Federal
Reserve Chairman Paul Volcker said that Illinois would need to
extend the tax increases to have a chance of emerging from a
Lang's plan was the first significant proposal to do this as
part of an overall pension fix.
Credit rating agencies have cited the partial expiration of
the tax hikes as a negative factor for Illinois, along with the
state's pension liability and structural budget deficit.
Illinois has the lowest rating among states from Standard &
Poor's and Moody's Investors Service.
Powerful state Senate President John Cullerton said he would
consider the tax proposal, but Republicans criticized it.
"When the income tax increase was passed by the Democrats -
they sold it as a temporary way to pay off bills, fix the
structural deficit and so on. To extend that tax is a betrayal
of trust with the taxpayers," said Senate Republican Leader
A legislative committee is holding a hearing on Thursday on
one of several proposals to reform the pension system.