Gov. J.B. Pritzker today unveiled a proposed fiscal 2022 budget that singles out Illinois business to pay the cost of right-sizing state finances at time when the COVID-19 pandemic is still raging.
The spending plan—$95.5 billion in all funds, just under $42 billion in the state’s operating or general funds account—generally holds spending flat, does not include a general tax hike and except for some health care savings, exempts state employees from financial pain.
But business, especially large firms, are being hit with $932 million in proposed higher levies—or “closing corporate loopholes,” as the governor and aides put it. And that figure could grow.
On the block are the net operating loss deduction, which would be capped at $100,000 a year, bringing in an estimated $314 million in the fiscal year beginning July; aligning tax treatment of foreign-source dividends, which many large companies earn, with the rate on domestic dividends, estimated to generate $107 million; and rolling back the corporate accelerated depreciation clause, worth $214 million a year.
Officials said all three of those merely would undo changes in tax law pushed through by former President Donald Trump over near-unanimous Democratic opposition in 2017. The proposed changes effectively undo those changes as they affect state taxes.
Also to go are a planned acceleration in exemptions for the use of biodiesel fuel, $107 million; a sales-tax credit manufacturers get for purchasing non-machinery items; and $30 million from the corporate franchise tax, which had been repealed, but which Pritzker wants to reinstate.
In one especially notable move, Pritzker is proposing to cap the fee retailers get for collecting state sales taxes at $1,000 a month, something that would exempt many small stores, but hit large chains. And he wants to “reset” the state’s tax credit for private school scholarships at 40 percent, down from 70 percent now.
The corporate tab could grow more—hundreds of millions of dollars more—if the governor is successful in reviving his bill to decouple from a provision in the last federal COVID relief bill allowing businesses to offset losses now against profits in the past, thereby getting tax refunds.
“If there is anything the last year should have taught us, it is that we need a reliably well- funded government,” said Pritzker in his budget speech, referring to the medical and financial response to the pandemic. And those programs must be funded, even at reduced levels, he continued.
In his speech as prepared for delivery, Pritzker asserted that his administration went out of its way to help small businesses deal with COVID, and said he would continue to try to do so.
“While the federal government writes billion-dollar checks to big businesses, here in Illinois we’re standing up for small businesses — or as I like to say — the big businesses of the future,” he said.
Pritzker did not directly reference the loss of his proposed graduated income tax in a referendum in November.
Overall, the proposed new budget projects that the general funds will take in about $1.8 billion less than they got this year. But that’s largely due to the fact that the state will not again borrow from the Federal Reserve to carry it through the pandemic, and indeed has paid back about a quarter of the $3.2 billion it borrowed.
Local tax revenue actually has been considerably higher than expected in the pandemic. But that’s due in part to the fact that income-tax filings were delayed, pushing into this year receipts that normally would have been received last year.
Though state aid to grade and high schools and for higher education will not increase for the second year in a row, Pritzker said education has gained from federal COVID stimulus bills. The state under the proposed budget would increase some spending for social service agencies such as the Department of Children and Family Services.
The proposed budget does fully fund the amount required by statute for state worker pensions. But that amount is billions of dollars a year below the level that is actuarily required, meaning that net state pension liability grows each year.
If President Joe Biden is able to pass his proposed $1.9 trillion COVID stimulus bill, Illinois is in line for $7.5 billion, with local governments getting almost that much again, according to congressional sources. Officials said some of that money may be earmarked for specific spending, but their first priority will be to pay back the Federal Reserve and reduce the state’s backlog of more than $4.5 billion in unpaid
via Crain’s Chicago Business https://ift.tt/1mywUHL
February 17, 2021 at 12:21PM