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Rauner paves way for keeping tax rates the same

Updated: July 23, 2014 12:44PM

The “Bring Back Blueprint — Jobs and Growth Agenda” issued last week by Republican gubernatorial candidate Bruce Rauner is a more nuanced and realistic approach, both fiscally and politically, than we’ve previously seen from him. But you have to read the fine print.

A Rauner campaign letter to “fellow taxpayers” issued just a few days earlier had characterized his platform as “simple”: First, “repeal the 67 percent Quinn-Madigan tax hike,” and second, “reform our state pension system to pay down the deficit and invest more money for education, roads, and public safety.”

Full disclosure here: I like and respect Rauner and have contributed to his campaign. But no governor of Illinois in the year 2015 will be able to manage the state’s finances or craft a fiscal year 2016 budget (due in early 2015) by cutting billions from the revenue side and also spending additional billions on pension funding, education, roads and public safety.

Newspaper columnists and others have noticed that last Thursday’s agenda is more realistic than Rauner’s earlier platform in that it allows for a phased repeal of the tax hike, thus avoiding the full drop in revenues in either 2015 or 2016. But it does something more significant.

The new Rauner agenda says: “If the reforms in the Bring Back Blueprint are enacted, Illinois will be able to grow our economy and completely roll back the Quinn-Madigan tax hike over four years, taking the individual income tax from the current 5 percent rate to 3 percent, and the corporate income tax from 7 percent to 4.8 percent. . . . This will allow us to continue investing in key priorities, like education.”

Embedded in this statement is what lawyers sometimes call a “negative pregnant” — a recognition that if the reforms are not enacted, then Illinois won’t be able completely to roll back the tax hike over four years. What are those reforms?

◆ “Modernizing” the state sales tax, extending it to some services

◆ Freezing property taxes

◆ Turning the state Department of Commerce and Economic Opportunity into a public-private partnership

◆ Ending the current EDGE tax credit program, and implementing a limited income tax credit based on jobs created or retained

◆ Reforming workers’ compensation

◆ Tort reform

◆ Reforming the state’s environmental and labor laws

◆ Reducing fees on limited liability companies

So if these reforms (all of them?) are enacted, we can roll back the Quinn-Madigan tax hike? But what are the chances these reforms will all be enacted by a Democrat-controlled House and Senate?

Similarly, Rauner’s agenda supports a “phased-in minimum wage increase, coupled with workers’ compensation and lawsuit reforms.” That way business can succeed while “at the same time providing” higher minimum wages. So no minimum wage increase without workers comp and lawsuit reform?

Rauner would thus appear to tie any tax roll-back or minimum wage increase to enacting needed reforms. But all the reforms won’t be enacted in early 2015. Indeed, none of them will. Therefore, Rauner would keep the income tax where it is — so as not to decimate the state budget. Good for him.

But if legislation isn’t passed to stop it, the tax roll-back will happen automatically at the beginning of 2015. That means a temporary tax hike will have to be re-enacted, and if Rauner is elected, he’ll have to sign it.

Senate President Cullerton and House Speaker Mike Madigan will need a partner who can share in the responsibility — and the blame — for restoring the tax hike and for the other reforms (including pensions) that are needed. More money will be needed — not less — to fund the pensions, education, and public safety. It would be a “grand” bargain in more ways than one.

Quinn can’t be that partner. Perhaps Rauner can.


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