In a bid to defuse a complex financial crisis that the state is facing, lawmakers have voted to raise income taxes by a rather dramatic 32%. On Sunday, the law- makers voted during an overtime session to bring in tax increases as part of the program to bring a much- sought- after conclusion to a budget stand- off that threatened to undermine the efficiency of the state's administration quite seriously.
The actual numbers
Thanks to the vote, the House has now endorsed a tax law change that impacts both individuals and businesses. While the income tax rate for individuals has been moved up from 3.75% to slightly lower than 5%, corporate will now have to pay 7% now while they were paying 5.25% earlier. The Senate will also peruse a spending plan involving $36 billion dollars of funds which was approved by the House. In an interesting development, Governor Bruce Rauner from the Republican party has already made it clear that he is not in favor of the proposals and will fight them. As a solution to pay back the billions owed in bills that are overdue, the Senate has proposed a borrowings plan which will be reviewed by the House now.
Lawmakers fail to save Illinois from entering dangerous waters
However, despite the tax increase move, earlier this week, Illinois lawmakers were unable to prevent the state from moving into dangerous waters when they missed a deadline to keep the state from entering a third fiscal year in sequence without a budget. This will impact the state in many ways including the provision of basic services which the state comptroller will have no choice but to shut down. The state's credit rating could see a big set- back given the circumstances and the overdue bills that have been growing year on year. The tax increases move can be seen as a silver lining in a situation that otherwise seems rather risky and bleak with no long term solution in sight as yet.
Illinois currently holds about $14.7 billion worth of overdue bills that are eroding its credit worth, a figure that is quite startling. The annual deficit stands at around $6.2 billion now. Alongside the tax increases which will bring in revenues into the State's coffers, Illinois has also adopted reductions of state spending that may further alleviate the pressure on the state's finances.