Budget Negotiations Continue Over Holiday Weekend
The Governor and lawmakers continue meeting after ten consecutive days of special session in an effort to reach agreement on a state budget and economic development reforms. Illinois has gone two years without a state budget and teeters on the edge of junk status with a skyrocketing backlog of bills totaling $15 billion.
Earlier today, a bright spot emerged when House Democrat and House Republican lawmakers voted in bipartisan fashion to adopt an amendment to SB 6 containing funding for an entire state budget. This was a show of good faith by both parties so that earnest negotiations can continue over the 4th of July holiday weekend. Following the vote, House Speaker Michael J. Madigan sent a letter to the bond rating agencies asking them to withhold judgment and “allow legislators time to negotiate a bipartisan, balanced budget.”
The Governor and legislative leaders are meeting to iron out the final budget and revenue package along with potential reforms including workers’ compensation reform, pension savings, and property tax relief. The Senate previously passed a budget totaling $37.3 billion in spending while Republicans are advocating a spending level of $36 billion. Illinois is currently spending around $39 billion largely due to court orders and consent decrees meaning that several billion dollars in spending will be cut.
The final revenue package will increase taxes by approximately $5 billion largely predicated on an increase in the state’s individual and corporate income tax rates. The tax plans being considered eliminate certain incentives including decoupling from the Qualified Production Activities Deduction but they also reinstate the Research & Development tax credit and Graphic Arts exemption.
Discussions are fluid and the IMA will be at the Capitol all weekend fighting for strong economic development reforms, pension law changes, and fiscal reform. Raising taxes without reforming state spending or making Illinois more attractive for job creators will not help the manufacturing sector.
Cook County Judge Halts Tax on Sweetened Beverages
Cook County Circuit Judge Daniel Kubasiak issued a restraining order on Friday afternoon blocking a new 1 cent per ounce tax on sweetened beverages that was set to take effect on July 1. Cook County President Toni Preckwinkle who championed this new tax is challenging the judge’s ruling with an appeal scheduled for the second week in July.
This is a tremendous victory for manufacturers, retailers, distributors, and the agricultural community that all play roles in the beverage supply chain. The Illinois Retail Merchants Association and several grocery stores sued on the premise that the Cook County tax violated the Constitution’s uniformity clause. The Cook County tax treats similar objects differently. For example, sweetened beverages sold in a can are taxed but beverages mixed and sold by a barista are not taxed. The tax is imposed on regular customers but individuals receiving SNAP (food stamp) benefits are exempt.
The IMA appreciates the leadership of the Illinois Retail Merchants Association for taking the lead on this important tax issue.