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    News > In the Headlines

    Largest tax hike in state's history


    By Dave McKinney and Whitney Woodward

    Chicago Sun-Times

    SPRINGFIELD -- Drawing a muted legislative response, Gov. Blagojevich on Wednesday proposed a record $60.1 billion budget reliant on the largest tax increase and biggest borrowing spree in state history.

    "Today, we will begin the biggest, most fundamental change in our four-year effort to put middle-class and working families at the center of who we fight for," Blagojevich told a joint session of the General Assembly.

    Claiming a "moral imperative," Blagojevich wants to infuse billions of new dollars into public schools, a new health care program for the uninsured and poorly financed government pension funds for state retirees.

    The governor's massive new wish list would be paid for primarily by $7 billion in new business taxes, the potential $10 billion lease of the state lottery and $16 billion in new borrowing.

    During his 33-minute speech, Blagojevich vilified the state's business community for shirking its "fair share" of government costs and imposing that burden on working families.

    'Pay their fair share'

    Buttressing his argument, the governor claimed the average individual taxpayer pays $1,500 in state income taxes. By contrast, he said, 12,521 corporations with Illinois sales of $263 billion paid an average state tax tab of $151.

    "Here is the choice we now face: overburden the steelworker, the farmer, the nurse, the janitor . . . by raising their income taxes or increasing their sales taxes or get the biggest corporations who are making billions of dollars in Illinois to simply pay their fair share," he said.

    "To me, the choice is simple," Blagojevich continued. "I stand with the people."

    The line failed to garner much of a reaction from lawmakers, who later clapped politely at his mention of funding increases for health care and schools but sat stoic for much his speech.

    Unlike some of Blagojevich's past speeches, this one did not prompt any rousing, Democratic-led standing ovations, suggesting deep skepticism within his party about his ideas and a potentially divisive budget fight ahead.

    "I think the governor is asking for another credit card," said state Sen. Martin Sandoval (D-Chicago), "and I'm not sure if he knows whether he can make the first payment when the bill comes in."

    Blagojevich wants to increase school spending by 23 percent next year and provide health care coverage for 1.4 million uninsured adults through a new plan called Illinois Covered.

    That spending would be covered through a $6 billion gross receipts tax on businesses, which would replace the corporate income tax. The new tax, for example, would target the sale of raw material to manufacturers, a physician providing medical care or a lawyer who has dispensed legal services.

    'Consumers will bear brunt'

    "I don't think you can ignore the fact that consumers will bear the brunt of this," said state House Minority Leader Tom Cross (R-Oswego).

    The other business tax pushed by Blagojevich, which would raise $1 billion, would impose a 3 percent payroll tax on companies that don't offer adequate health insurance coverage.

    State Senate President Emil Jones (D-Chicago), a staunch Blagojevich ally, said he fully supports the governor's money-raising initiatives and spending priorities.

    "It accomplishes a lot of what I'd like to see accomplished," Jones said of Blagojevich's plan, adding later, "At this point, I don't see anything basically I'd like to change."

    Jones also raised the possibility that a gambling package that would include a casino for Chicago and the south suburbs, at a minimum, could surface this spring to fund a massive state bricks-and-mortar program and a Chicago Transit Authority bailout. The governor was silent on that topic in his speech.

    Illinois House Speaker Michael Madigan (D-Chicago), who has been cool to a past attempt by Blagojevich to sell or lease the lottery, declined to take questions about Blagojevich's speech. A Madigan aide said he wanted to see "the fine print" before casting judgment.

    Who benefits?

    Highlights of Gov. Blagojevich's budget proposal for fiscal year 2008, which starts July 1:

    - BOTTOM LINE: $49.1 billion in operating expenses, an increase of 7.4 percent, plus $11 billion in construction and maintenance costs.

    - WHERE IT GOES: 38.7 percent to education; 29.2 percent welfare; 20.1 percent human services; 5.4 percent public safety; 3.6 percent government services; 1 percent economic development; 0.3 percent business and environmental regulation.

    - NEW MONEY: $3.6 billion, including $900 million in natural tax-revenue growth.

    - EDUCATION: $1.5 billion in new funding, a 23 percent increase. Another $1.5 billion in construction funds would help districts build new schools and repair old ones.

    - PENSIONS: More than $27 billion would be placed in government retirement systems, bringing them to 83 percent of full funding. Most of the money would come from a $10 billion plan to privatize the lottery and $16 billion in bond sales.

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