In the aftermath of federal tax reform, a couple of state lawmakers are sounding off on what the state of Illinois needs to do when it comes to taxing and spending. One wants to take a wait-and-see approach. Another says the state must address its spending problem.
From proposing state tax cuts or even lawsuits against the feds, a number of high-tax states like California and New Jersey are looking at ways to lessen the impact of federal tax reform on their state’s bottom lines. What’s happening in high tax Illinois? Not much.
Illinois has some of the highest state and local taxes in the nation and is rivaled only by New Jersey for the highest property tax in the nation.
The federal tax reform puts a $10,000 cap on the amount of state and local taxes, or SALT, deductions taxpayers can write off on their federal taxes. That is expected to pinch tax filers with more than $10,000 in property taxes as they won’t be able to deduct above that.
State Rep. Mike Zalewski, D-Chicago, said before moving forward with any ideas, lawmakers must fully digest the federal reforms.
“That being said, when we get to Springfield and when we talk to our colleagues and when we talk to stakeholders, [we need to] make sure we’re being responsive to the concerns people have and go from there,” Zalewski said.
State Rep. Tim Butler, R-Springfield, said he pulled numbers from Sangamon County and a very small percentage of residents and businesses actually paid more than $10,000 in property taxes, so he didn’t see that being a big issue. However, he said spending drives taxation and there must be a focus on spending reform in Illinois.
“As time goes on, we’ve seen a real stranglehold on being able to use our tax dollars in other ways and more of it going to things like pensions and Medicaid,” Butler said. “We’re going to have to address those situations. We’re going to have to figure something out on that.”
Zalewski said high property taxes in Illinois are a concern and, given the recent income tax increase and the battle over the now repealed soda tax in Cook County, “we need to be mindful of tax fatigue in this state."
Regardless of what happened in D.C., we need to sort of keep in mind we need to be responsible to the taxpayers as well,” Zalewski said.
Butler said one way lawmakers can be responsible to taxpayers is to address the state’s pension crisis.
“This pension problem isn’t going away,” Butler said. “We have $130 billion-plus in unfunded pension liability. The public employees of this state need to be part of that solution.”
Despite various efforts and ideas to reform public sector pensions in Illinois, lawmakers finished out last year without substantive reforms.
Butler said he’d like to roll back the income tax increase Democrats and some Republicans imposed on taxpayers last summer over the governor’s veto. Butler didn’t support that measure. He also said the federal reform doubling the standard deduction will keep more money in taxpayers' pockets and help spur more economic activity.
Illinois state lawmakers aren’t back in Springfield until Jan. 23 in the House, a week and a day before Gov. Bruce Rauner delivers his State of the State address.