Deal would boost state income tax to 5.25% on individuals, 8.4% on companies

Source: Crain’s Chicago Business
Posted by Greg H. at 1/6/2011 6:55 PM CST on Chicago Business

Springfield sources are confirming that Democratic legislative leaders and Gov. Pat Quinn have struck a deal to almost double the state income tax, boosting the individual levy from 3% now to 5.25% and hiking the corporate rate to 8.4% — the highest of any state in the union.

In addition, the cigarette tax would rise $1 a pack.

Spokesmen for Senate President John Cullerton and House Speaker Mike Madigan declined to confirm a deal. But individual lawmakers said they have been briefed on its details, and told to expect to vote on it as soon as Friday.

Under the reported deal, the income-tax increase would last for four years, and, at least in theory, be used to pay off billions of dollars in state debt. But 1/4-cent would go toward property tax relief.

The income-tax hike overall would net the state about $6 billion a year in additional funds.

The cigarette tax, yielding an estimated $377 million, would go toward boosting funding for public education.

The hikes are likely to provoke strong protest from some — particularly since Mr. Madigan had been pushing a smaller hike and refusing to act without GOP support. But minority legislators held out for property-tax relief and more school aid, and apparently ended up prevailing.

The Senate is scheduled to adjourn for the weekend on Thursday night, and vote on the tax hike on Tuesday. The House could vote on the measure on Friday.

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