State of the States
Illinois Governor Recommends Overhaul of State’s Tax System
Gov. Rod Blagojevich used his March 7 budget address to unveil a proposal to overhaul his state’s tax system, a move that he predicts would pour billions of dollars in new revenue into Illinois schools.
The Democratic governor, speaking to a joint session of lawmakers, called for replacing Illinois’ corporate income tax—which he described as “loophole-riddled”—with a gross-receipts tax, or a tax on goods and services provided.
That change would be fairer to middle-income and working-class families, and would relieve local governments and school districts from relying on property taxes, argued Gov. Blagojevich, who was re-elected to a second term in November. The governor said Illinois now has “one of the most regressive tax systems in the nation.”
Such a tax overhaul, he said, would “finally bring an end to the savage inequality in how we fund our schools.”
The proposed tax shift would provide schools with an additional $10 billion over the next four years, the governor predicts. Overall, the K-12 general-fund budget would increase by 23 percent, to $8 billion in fiscal 2008, which begins July 1, from $6.5 billion in fiscal 2007.
For years, education advocates and some legislators have decried Illinois’ system of paying for schools as being too reliant on property taxes, a structure that they say harms tax-poor school districts. Some lawmakers have proposed reducing property taxes and increasing state income taxes, but the governor has rejected that approach.
Clare Fauke, a spokeswoman for A+ Illinois, which seeks to improve school funding and school quality, said her organization supports the governor’s plan. “We think it’s a strong proposal,” Ms. Fauke said. “It’s a good starting point.”
The governor also proposes leasing Illinois’ state-run lottery to help close a gap in the state’s pension fund, which supports teachers and other state employees’ retirement and has an unfunded liability of $41 billion.
Vol. 26, Issue 27, Page 20