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Lawmakers Ponder Tax Changes to Grow Economy

Updated: Friday, February 7 2014, 09:53 AM CST

Illinois lawmakers continue to look for ways to improve the tax climate in Illinois.

The Commission on Government Forecasting and Accountability has been researching different ideas as well as what is happening in other states.

According to their findings, states that lowered corporate and personal income taxes over the last 5 years have higher unemployment than states that lowered the same rates.

Dan Long of C.G.F.A., tells us Illinois has one of the highest corporate income tax rates in the country, at a base of 7%, plus the Personal Property Replacement Tax of 2.5%, adding up to 9.5%.

"So Illinois seems to be lagging behind," said Long, "we've got one of the highest unemployment rates in the state at 8.6%, only 2 states are higher."

House Speaker Mike Madigan recently introduced a bill to cut base coporate rates in half.
"We're fairly competitive now, with the personal income tax," said Long, "in regards to the corporate tax, should they decide to reduce it to 3.5, even with the the 2.5 percent replacement, you'd be about the middle of the pack."

Or lawmakers can do nothing, and allow both the personal and corporate income tax rate hikes to begin to expire as scheduled.

"We're going to lose about 1.6 billion dollars," said Long, "it's only half in fiscal year 2015, when it's fully implemented, you're going to lose about 4.8 billion dollars, you lose the full amount in fiscal year 2016 and beyond."

Political analysts like U.I.S. Professor Kent Redfield say that means lawmakers can't really have the discussion of changing tax policies to help job growth, without going knee deep into the budget and looking for things to cut.

"Clearly we either have to stop doing things, or we have to get more money," said Redfield, "and frankly we may end up paying for less ultimately when we got done with all of this."

Both Redfield and Long believe the best chance for any action will be after the November election.

"Nobody wants to do this, and nobody wants to say it or vote for it," said Redfield, "and so, I think the veto session is likely to be a lot more exciting ultimately than the regular session is going to be this spring."

Redfield adds that Madigan's proposal to cut corporate rates may simply be about positioning his candidates for the fall election.

The idea is the bill could pass the House, not pass the Senate, and still help House Democrats in November.

"Nothing is going to become real until after the election anyway," said Redfield, "part of this may just be one more bullet point that you can put on your flyer, in terms of how you're business friendly because you voted to cut the corporate income tax."

Lawmakers Ponder Tax Changes to Grow Economy

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