Tuesday, June 23, 2009

Fact Sheet: House Bill 174

The Center for Tax and Budget Accountability has provided us with the following "fact sheet" which provides details about House Bill 174; the bill in question when it comes to a tax increase.

FACT SHEET: HB 174 Education and Fiscal Responsibility Act
PROBLEM: Illinois’ fiscal system is broken.

State revenues cannot meet the cost of existing human services, education, and pension obligations.
The reality is that the current revenue system does not keep pace with existing costs, adjusting solely for population growth and inflation over time. This revenue gap or “structural deficit” is reflected every year as state government cuts programs, reduces staff, raids other funds, defers payments to healthcare providers and borrows against the state pensions to balance the budget as required by the state constitution. In short, Illinois is not generating enough revenue to meet existing obligations. The real cause of the state’s budget deficits is not overspending. Despite, having the fifth largest population of any state in the nation, Illinois ranks 45th in spending on services.

The state’s tax system, initially designed in the 1930s, is outdated and does not grow with the modern economy as a result, Illinois generates less revenue than needed to maintain current public service levels, adequately and fairly fund education, and make its required pension payments from year to year.

SOLUTION: Illinois needs a comprehensive package of fiscal solutions.

  • Policymakers can fix the state’s broken fiscal system. Illinois must modernize the state tax system in order to raise enough money to pay its bills – this requires a comprehensive package of fiscal solutions. HB 174 raises approximately $7 billion in new revenues while modernizing the state’s tax system and making it fairer; doubles the state income tax credit Illinois homeowners receive for property taxes paid on their principal residence; increases the corporate income tax rate from 4.8% to 5%; and makes meaningful new investments in education.
  • Illinois must close the structural deficit. To attain sound financial footing and fund needed public services into the future, Illinois must close this budget hole with new revenue. The state currently has a deficit of $9.2 billion, while the General Fund is projected to be around $30 billion. Cutting spending on essential services such as education, healthcare and human services by up to 30% not only makes no sense, it would devastate communities across Illinois, while lengthening the recession.
  • Illinois must reform education funding. Illinois has the most unfair school funding system in the nation, where spending differences per student can be as high as $19,000 between districts. HB 174 would significantly reduce these funding discrepancies by devoting 33 1/3% of all new revenues to the Common School Fund that provides general state aide to K-12 education, particularly in low and middle income communities across the state. HB 174 reduces reliance on property taxes to fund schools by doubling the Illinois residential property tax credit.
  • Illinois must adequately fund human services. Despite growing demand for public services, spending on human services decreased by $387 million, or 10%, between 2001 and 2004, after adjusting for inflation. Without comprehensive fiscal reform, human services funding will continue to decrease and Illinois working families will suffer. In fact, if Illinois balanced its budget by cutting $9 billion in spending, the state would lose over 128,000 jobs and increase its unemployment rate to over 11% (state unemployment stands at 10% as of June 18, 2009.)

For more information, please see the Center for Tax and Budget Accountability’s Moving Forward: To Counter the Current Recession, Illinois State Government Should Maintain or Enhance Spending - Even if it Means Progressive Tax Increases - Rather Than Cut its Budget, March 2009 report on the website at www.ctbaonline.org.

HB 174 Fiscal Solutions Package
  • Mandates a significant increase in the annual appropriation for grants to institutions of Higher Education, that is community colleges through public universities.  Funds education accountability reforms.
  • Maintains and expands grants for high-poverty schools.
  • Funds teacher and principal mentoring programs.
  • Provides funding for science, math and technology programs.
  • Increases the personal income tax rate from 3% to 5%.
  • Increases the corporate income tax rate from 4.8% to 5%.
  • Expands the sales tax base to cover 39 different consumer services that are already taxed by Illinois' neighbor states.
  • Triples the state's Earned Income Tax Credit, providing tax relief to low income, working families.
  • Doubles the residential property tax credit homeowners can claim against their state income tax bill from 5% to 10%.
  • Provides meaningful support to local governments by fully funding the Local Government Distributive Fund, reducing the pressure on skyrocketing property taxes.

The Illinois State Senate approved a revenue plan that would have funded the state’s critical human needs, addressed its long-term structural deficit, and provided some relief from regressive taxation.

On May 31, 2009, HB 174 was passed in the Senate 31-27-1.
HB 174 was never called to a vote by the House before the legislature adjourned.
For More Information: Ralph M. Martire, Executive Director Center for Tax and Budget Accountability (312) 332-1049; rmartire@ctbaonline.org http://www.ctbaonline.org/


  1. PLEASE Pass HB 174 Before you RUIN ALL our communities beyond repair!

  2. Rep. Cavaletto's office passed the buck, saying Michael Madigan Controlls what bills come to a vote. Even IF that's true, we Know Now that the House of Representatives is the reason for NOT having a Fair & Balanced Budget!


  4. Please pass this before the entire education system in Illinois is derailed.

  5. What about the Early Intervention program?

  6. HB 174 will raise individual income taxes by about $7B and corporate income taxes by $70M. That means that the ratio if almost 100 to 1 (or corporations will pay only 1% of the tax increase).

    In addition, the property tax credit will be only about $700M. That means that for every $100 in property tax currently paid the reduction will be $10.

    It appears to me that this bill is mainly a tax increase on the middle class.

  7. This bill has good and bad proposals. Yes we need to increase revenues, but this bill will just cause a lot of the tax burden to be placed on the middle class in the form of higher costs for services. The bill doesn't address the employee unions that are robbing the state blind. As always the Democrats bend over for the unions.

  8. There appears to be a tax on laundromats in this bill. Most people who use laundromats are low income. That particular portion of the bill needs to be removed.

  9. I support this bill with the exception to the additional tax percentage. I would only increase 1% for personal as it is the individuals that are truly suffering and place a higher increase to the corporation. Turning 4.8% to 6%. Take the stimulus money awarded to the state for these programs and use the monies where they were promised to apply. i.e. Lottery for improved schools, tolls for improved highways, etc.

  10. Pardon my cynicism but what guarantee do we have that this money will ACTUALLY go towards what they are proposing it goes for? Haven't we been down this path before? PLUS this money wouldn't go towards the schools until 2011!!! My kid's school has already eliminated half it's sports programs, the honor's classes, it's entire music department and it's art department for the 2010/2011 school year. So something is telling me that we'd get this fairy tail "oh we will bring those programs back for the school year after next" only to never see them again because there will be other BS expenses like the Superintendant and his buddies raises. Sorry but I no longer trust anyone when it comes to money and greed. I can just see this getting passed only to never see the effects they are promoting it for. They say it will save the cut-backs in education. I say they should have a guarantee like an election vote that the taxes can be rescinded if we don't see this money being used what it's being promoted for. Until we hold these so called "leaders" accountable, our hard earned money will NEVER go towards what it should.

  11. There are many services that have to be cut! This is the biggest entitlement program state in the US. We just cannot afford it any longer. The post above mine is absolutely correct. It has been proven that this state and its programs cannot be trusted to spend money wisely. And I for one am sick of paying for program after program. Too many of these programs are a bunch of !

  12. I'm always amused by 'fact sheets' that don't cite sources for their 'facts'.
    Until there are sources for this information, the author is a shill, and a poor one at that.

  13. Why are so many people demanding to have their taxes raised???

    They demand corporate taxes be raised.
    How many times must it be pointed out that corporations don't pay taxes? Their taxes are a cost of doing business and are, therefore, rolled into the price of their good or service. So, those who buy their good or service ultimately pay the tax levied on the business. Anyone who tells you otherwise doesn't understand that that is the way business works. If we continue to raise the corporate tax rate there will come a time when rate will be high enough that businesses will no longer be able to compete; the price for their good or service will be too high. Once that happens the business has one of two choices; 1) close or 2) move to another state where taxes are lower so they can once again compete. Either way the state then loses not just the tax revenue they were receiving from the business, but also the revenue they were receiving from the folks who worked for that business. The state also begins losing money on unemployment, Medi-caid, food stamps, etc. that must be paid to those who lost their job. It seems to me we ought to be demanding they lower taxes on businesses, which would not only keep the businesses we have here already, but would encourage other businesses to move here.

    They are demanding their income taxes be raised.
    This makes absolutely no sense to me. We are over taxed as it is between local, state, and federal, why on earth would anybody in their right mind demand to have their taxes raised?? Government at all levels has proven they cannot and/or will not be responsible with our money, why give them one more cent than they already receive?

    Just my $.02.

  14. I don't know if this bill is the right thing to do or not, but I teach in Illinois. Our state is cheating its students; our country is cheating its students. The teachers get the blame because U.S. students aren't as good as others in the world, but we are continually losing funding to be able to afford things the schools need to help our students succeed. We need, as a country and as a state to live within our means.

  15. I read something about withdrawing funds from 529 plans, am I reading this incorrectly?

  16. How many cuts have been made to Pat Quinn, Michael Madigan and all the other higher level elected officials? What discretionary funds have been cut (office remodeling, travelling expenses, etc.)? It baffles my mind that we can place such little value on the very people who help us (police, fire, emergency services, teachers, mental health workers, social workers) and yet expect them to tackle life threatening situations, educate our children, protect our communities etc.

  17. The last thing we need is another tax increase. Taxes are already out of control and what have they done to make our schools better? NOTHING! For starters get the unions OUT of public schools. That alone would probably solve the problem. I hope to see the public school system fail once and for all. It is a massive black hole where nothing can escape, especially money. Money goes in, nothing comes out. These days public schools are places for the commies to brainwash our kids with their dribble. If this trend continues i will pack up and move to a red state. Then sit back and watch the liberal utopia implode.

  18. The Illinois individual income tax rate increases from 3% to 5%, 2 whole percentage points.

  19. The money raised won't go to the schools. It will get lost in Springfield or in the Chicago machine and won't help out our education problem at all. No bills can fix corruption.

  20. Anonymous said...
    The money raised won't go to the schools. It will get lost in Springfield or in the Chicago machine and won't help out our education problem at all. No bills can fix corruption.

    Well said. I couldn't have said it better myself.

  21. this is the problem "Corruption" fix that not more taxes. We need to see where the money goes first, then we can talk about more taxes. Here is the man who wants more money! http://articles.chicagotribune.com/2010-01-22/news/chi-100121-madigan-main-story_1_madigan-getzendanner-madigan-rules-conduct-and-compliance http://www.chicagotribune.com/news/education/ct-met-madigan-admissions-20100505,0,6222606.story

  22. This money will short retirement pensions for State employees, and will not go to education. The lottery and tollway has funds that are slotted for education, but never makes it there. Review legislation that is always dedicating monies we do not have for some new initiative that is not fiscally possible in this economic climate. State employees are Illinois citizens too and should not absorb every misappropriation of funds. By all means, legitimately raise revenues, but do not do it on the back of state employees, and by ALL means, devote funds equitably to schools and education - our children really ARE our future. Let's be real.

  23. I too am a teacher in Illinois and am tired, even of some of my colleagues, saying we need a tax increase. My school (Chicago suburban) has one of the LOWEST per pupil spending in the entire state, yet every high school in our district is ranked as a top school (I think, one of ours was in the top ten). It's not how much money you throw at the problem, it is how well it is managed and Illinois has proven it can't be trusted to manage money. One of the other education proposals would take money from education for vouchers. While I think that can be a type of solution, the proposal would take it statewide and only give it to students of low-performing Chicago schools. That is not representing the whole state's interests.

  24. They only fly in the ointment that I can see from a quick glace is this. The personal income tax rate goes up 2 percent while the corporate tax rate only goes up 2 tenths of a percent. It should be the other way around. We the people keep bailing out big business, and it is time to quit giving them the breaks. Give the breaks to those who need it, low to mid income families.

  25. Instead of raising taxes, why not just lower your pay.

  26. I am a social worker in the Chicago area. There hasn't been a tax increase in Illinois in ages..so I'm not sure why people are whining about an increase. We need money to continue servicing our underserved populations. I care about education, and social services to the poor. We are all responsible for the success of our society whether we like it or not! Therefore, look at your tax increase as a service to humanity..Be a cheerful giver..Geez!