Prior to the expiration of the 99th General Assembly, the Senate leaders had reported that they had reached a tentative bi-partisan agreement on a budget package framework. Although the package was filed in the last days of the 99th General Assembly, the 99th General Assembly adjourned Sine Die and the leaders promised that they would take the package up for consideration the first week of the 100th General Assembly. Immediately after convening the 100th General Assembly on Wednesday, Jan. 11, the framework package was introduced in 13 separately filed bills.
The Senate package includes a tax package (SB 9), minimum wage increase (SB 2), six new casinos and slots at race tracks (SB 7), a temporary two-year property tax freeze on the school portion of the tax bill (SB 13), workers’ compensation reform (SB 12) bonding to pay off $7 billion of the current $11 billion backlog (SB 4), pension reform (SB 11) procurement reform (SB 8), limited consolidation of local governments (SB 3), and a K-12 education funding reform (SB 1). Currently, the K-12 education funding reform has no details. Each bill is contingent on the other 12 passing before that bill can become law.
As promised, the bills were sent to the substantive committees to be considered. With the exception of the education funding reform bill and the minimum wage bill, broad discussions were held on the rest of the package and were sent to the Senate floor to be held for further discussions. Immediately prior to the meeting of the Senate Revenue Committee, an amendment was filed that drastically changed the scope of the tax package. The controversial sugar-sweetened beverage tax was removed. To replace this revenue within the tax package the creation of an excise tax of 5% on an array of services and a “Business Opportunity Tax” based on payroll range were included. The excise tax on services is modeled on the current structure in Wisconsin. As currently envisioned, the services to be included would be landscaping services, laundry and dry cleaning services, amusements, and repair and maintenance services. There would also be a 7% excise tax on cable television and direct broadcast satellite services. The implementation of the excise taxes rather than an expansion of the sales tax base to include these was in response to a constitutional case based on the Illinois’ constitution prior to the 1970s Constitutional Convention. The excise tax approach is unnecessarily complicated and the constitutional issue does not exist. The “Business Opportunity Tax” replaces the franchise tax and includes five different tax brackets which would require employers to pay between $225 and $15,000 in taxes on payroll for a taxable year.
Also included in the package is an increase in the corporate income tax rate from 4% to 7% and the personal income tax to 4.99%. Additionally, it eliminates the unitary business non-combination rule and decouples from the domestic production activities deduction. It also redefines the graphic arts production and the manufacturing machinery and equipment exemption. Finally, the package closes the loophole that allows private individuals/entities to bring lawsuits as realtors in instances where they believe a fraud of some kind has occurred. Income tax is exempt from the False Claims Act. Through an oversight, sales tax is not. As a result, Illinois businesses are facing inventive lawsuits from one particular contingency fee attorney who alleges the improper collection of sales tax on shipping/delivery charges even though the businesses are following the laws, regulations,and guidance of the state and the Illinois Department of Revenue.
It is important to understand that the package is a living document and is completely fluid as leaders, lawmakers and advocates continue to negotiate. In its current form, it is a Senate effort. The process will ultimately need to include the House and Governor Bruce Rauner.