Editorial: Populist Pritzker and the fine print of his budget proposal

Tax hikes on businesses and individuals didn’t make the cut in Illinois Gov. J.B. Pritzker’s budget address, but they’re a big part of his budget proposal.

Gov. J.B. Pritzker is doing and saying things lots of Illinoisans like. The governor just pushed back on the notion of public funding for a new White Sox stadium, saying, “The idea of taking taxpayers dollars and subsidizing the building of a stadium… does not seem like [it] should have higher priority. These are private businesses.”

He’s right on that front. The governor also called for the elimination of the state’s grocery tax in his budget address last week. Many people cheered. After all, Illinois is the only big state in the country to tack on a grocery tax at checkout.

Not everyone was cheering, though. Especially local government leaders, who realized they were losing a hefty source of tax revenue. That’s because 100% of the grocery taxes we’ve all been paying flowed to local leaders, to the tune of “hundreds of millions of dollars,” according to the Illinois Municipal League’s Brad Cole.

Local governments aren’t the only ones taking a hit. Businesses and the people who own them are in for discomfort, too, in the form of major tax changes.

Here’s the breakdown of Pritzker’s $898 million in tax hikes on businesses and individuals:

• Extending the cap on net operating losses. This would result in a $526 million tax hike for companies. Only two other states – Pennsylvania and New Hampshire – place caps on the amount of net operating losses a business can claim. Illinois’ corporate income tax rate is also the second-highest in the nation.
• Increasing the sports gambling tax rate from 15% to 35%. Estimated to bring in an additional $200 million.
• Capping the retailer’s discount on sales and use taxes to generate an extra $186 million. This is essentially a corporate tax hike on any business that sells a product that’s subjected to the sales tax, whether it’s Barnes & Noble or your local independent bookstore.
• $93 million hidden individual income tax hike. This move will reduce the value of Illinois’ standard income tax exemption, subjecting an additional $225 of income to taxation per taxpayer and dependent. After years of rampant inflation, Pritzker is shortchanging the inflation adjustment on the state’s standard exemption for individual income taxes. By limiting the growth in the value of this exemption, Illinois taxpayers are facing a $93 million income tax hike. This tax increase would disproportionately fall on lower-income earners who receive a larger tax break from the exemption than higher-income earners.   

Pritzker’s $898 million in tax hikes bring in just enough to cover the growth (not total spending) for pensions and government worker health insurance. The total cost for these two items alone cost nearly $13 billion.

Pritzker rightly recognizes the need to present Illinoisans with tax relief. Problem is, this budget gives the people what they want at the expense of everyone but the governor.

Increased business costs could weaken growth. Taking away revenue from local governments means they’ll have to look for it elsewhere – most likely by adding to our second-highest in the nation property taxes.

We might get a little break at Jewel-Osco or Kroger’s, but we’ll see our taxes go up somewhere else.