Pritzker’s plan to reduce state deficit fails

A change in federal tax treatment of net operating losses and excess business losses was automatically applied to Illinois tax bills as part of the federal CARES Act approved last spring. Democrats said that given the state’s fiscal challenges, Illinois would miss out on much-needed revenue unless it decouples itself from that tax relief provision. But opponents said it pulled the rug out from businesses who were counting on a break.

Rep. Mike Zalewski, the sponsor, said decoupling would close a $1 billion exposure in the state’s budget. Without the change, he says the state’s assumed deficit would balloon from $3.9 billion to as much as $4.9 billion, depending on what taxpayers claim in losses.

"There’s no point in sugar coating it," he said this afternoon.

Pritzker’s administration first publicly proposed the decoupling on Jan. 8 as part of a series of “tough choices about what we can and cannot afford” to close that budget deficit.

“Right now, we cannot afford to expand tax breaks to businesses that already receive tax breaks,” Pritzker said at the time. Spokespeople for the governor’s and his budget office did not respond to a request for comment.

New York state was the first to decouple from the tax break provision back in April, followed by half a dozen other states. Republican opponents in the Illinois House argued it amounted to an unexpected, backdoor tax increase that the state’s Department of Revenue should have made members aware of last month.

Illinois lawmakers lost time when they didn’t meet for veto session and when Democrats stalled in choosing a new speaker, said Zalewski.

The debate began at roughly 1 a.m. today, with the lame duck session soon to expire and with the fate of House Speaker Mike Madigan still in the balance.

“This is a $1 billion tax increase on small businesses,” outgoing state Rep. David McSweeney, R-Barrington Hills, said, raising his voice. “Everybody needs to wake up!”

Lawmakers might consider the measure again in March, said Zalewski, but, by then, taxpayers might feel double-crossed.

via Crain’s Chicago Business

January 13, 2021 at 09:49PM

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