Tax Hike Not Supported in McHenry County

McHenry County state legislators were among the minority voting against a hefty tax hike, aimed at bailing the state out of its budget crisis.

“I think we should be proud of the fact that every state official from McHenry voted ‘no,’“ said Pam Cumpata, president of the McHenry County EDC (Economic Development Corporation).

“I believe that businesses understand the state needs to pay its bills, but I think individuals and businesses are looking to the state to make adjustments to spending, just like they have to,” Cumpata said.

The measure will increase individual income tax from 3 to 5 percent, and raise corporate taxes from 4.8 to 7 percent. The added income will be used to balance the state budget and pay off unpaid bills and other debts.

State Sen. Pamela Althoff, 32nd district, said her phones were ringing all day with calls from families and businesses in McHenry County. She said she had so many e-mails, her computer froze.

“One of the reasons it’s so difficult for my constituents to swallow is that they pay far more across the board. The collar counties send, by far, more money to Springfield and get far less services,” Althoff said. 

Athoff said most state dollars go to Chicago and downstate.

Althoff was among Republicans urging the state to find the money elsewhere.

“We need to look at all the issues and figure out where we can save. The state can either reduce programs or reduce the number of people who are allowed access to programs. It is difficult–absolutely,” Althoff said.

She said there are many areas where the state can cutback that, collectively, can make a difference. Possible areas including taxing pensions and doing away with unfunded mandates for schools and local government, Althoff said.

Althoff said she has already supported measures that would reduce the state’s debt, including Medicaid reform and repealing the state’s death penalty, which would save money spent on litigation. She said death row litigation costs the state $120 million per year.

Althoff said many people believe the tax hike will ensure programs are maintained, but she points out, the tax increase is to pay off $13 billion in debt.

Althoff’s vote on Wednesday was among the minority in the Illinois Senate; the group approved the measure by a vote of 30 to 29.  The Illinois House signed off on the tax increase on Tuesday. Before the measure goes into law, Governor Pat Quinn must sign it, which he is expected to do in the coming days.  

“I’m going to look at that [income tax bill] very carefully. It’s a very important measure that deserves lots of study and that’s what I’m going to do,” Quinn said in a press conference Thursday.

In quantitative terms, a person with $100,000 in taxable income will have to pay $5,000 in income taxes this year as opposed to $3,000 in years past. Corporations will also have to pay up, which CPA David Robbins says could deter businesses from coming to Illinois.

“There’s no incentive for businesses to come here or stay here now,” Robbins said.

Robbins is a partner at Nieminski Robbins & Associates in South Barrington. He says the corporate tax increase could cause more damage than good.

“The tax increase will discourage businesses from coming to Illinois and trying to make money in our state.” Robbins said. “If people are looking to move or move business to Illinois, someone’s going to advise them not to move here because of these taxes.”

Cumpata, of the McHenry County EDC, said she hasn’t heard of any businesses being recruited by Indiana or Wisconsin yet, but the governors of both states have said they will go after Illinois business.

“The state of Illinois has assets that other parts of the country don’t have. We have an international airport, an attractive region, good educational institutions and hospitals,” Cumpata said. A major function of the McHenry County EDC is to attract businesses to the area. Cumpata said the tax hike makes that work more challenging.

The tax increases are large, but they aren’t permanent. The plan is paired with a strict two percent cap on spending growth. If state officials spend more than that, the tax increase will be canceled. Even if officials stay within their spending means, income taxes will drop back down to four percent in 2015. 

“These next four years we have to deal with the situation that occurred in the previous 28 years,” Gov. Quinn said. “There were many things that were done in the past that helped cause this deficit, now we have to get out of the deficit and recover.”