Gov. J.B. Pritzker’s next agenda item: Building support for overhauling income tax system

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Speaking at the University of Illinois at Chicago, Pritzker highlighted his proposal of a 5 percent increase in general operating funds for the state’s colleges and universities along with a $27 million infusion into the financially-troubled College Illinois pre-paid tuition program; a $50 million increase in funding for the Monetary Award Program, or MAP, grants for lower-income students; and $2.5 million to defray the Advanced Placement testing fees for lower-income high school students.

“It puts college students front and center, and it builds on the historic investments and improvements that we’ve made to strengthen our higher education system,” Pritzker said.

But his speech wasn’t just about finding backers for his budget plan. It was also a pitch for support of a constitutional amendment to overhaul the state’s income tax system, because without that, most of those funding increases are unlikely to happen.

“Some of this funding must be held in reserve until we know the fate of the constitutional amendment that would change our tax structure to treat working families more fairly,” Pritzker said.

The proposed state constitutional amendment, on which voters will decide in the November general election, would do away with the current “flat” tax rate of 4.95 percent and give lawmakers authority to adopt what’s called a graduated tax structure that levies higher tax rates on higher levels of income.

Lawmakers have already passed a bill, which Pritzker signed last year, setting out what those rates would be starting Jan. 1, 2021, if the amendment is approved. Most tax filers would pay the same or slightly lower rates while upper income filers — individuals with incomes over $250,000 a year — would pay higher rates.

State revenue officials estimate that the tax would generate about $3.6 billion a year in new revenue, including about $1.4 billion for the final six months of the next fiscal year, January through June 2021.

Pritzker said the proposed increase in operating funds would help hold down tuition rates while the increase in funding for MAP grants and the College Illinois program would help make college more affordable for working families.

Pritzker during his remarks Thursday made a special pitch for College Illinois, a program launched in 1993 that allowed families to sign contracts and prepay tuition for their children and grandchildren. It was predicated on the idea that their money would be invested and earnings on their investments would outpace future tuition increases.

“Unfortunately, the program’s advocates didn’t forecast that tuition increases would outstrip market returns, and two decades later we find ourselves in a place where the program and its promises will be insolvent in the next six years,” Pritzker said.

College Illinois stopped signing new contracts in 2017. According to the most recent financial report, the program has an unfunded liability of $317 million.

Republican lawmakers, who oppose that graduated tax plan, also have been harshly critical of that strategy, arguing Pritzker should have submitted a budget based on current law, not on “hypothetical” revenues that voters haven’t yet approved.

Pritzker during his budget address in Springfield on Wednesday called for increasing spending for education, child welfare and public safety. A large portion of those spending increases could be reduced or outright disappear if voters don’t approve the graduated income tax proposal in November. 

Pritzker said his proposed budget “represents a bridge to the future, where I believe we have an opportunity to change our tax structure so working families are treated more fairly.”

Senate Republican Leader Bill Brady of Bloomington said Pritzker is spending hypothetical money in his budget plan.

“The governor has a difficult job, particularly within his party,” Brady said on the Illinois Lawmakers public television program. “He’s got to placate a lot of people in the Democratic Party who want to spend a lot of money on a lot of programs. He outlined a budget we think is shortsighted in that it relies on tax rate increases that the voters have not yet approved.”

Brady said Republicans think the entire $350 million increase promised to K-12 education, full payment of year’s pension obligations and boosting spending for DCFS can be accommodated in a budget without going to a graduated income tax.

The State Journal-Register contributed to this report.

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February 20, 2020 at 06:43PM

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