Lt. Gov. Quinn demands tax relief for everyday people of Illinois State must reform its ‘Soak the Middle-Class' tax code, says Lt. Governor

CHICAGO - As millions of taxpayers across Illinois raced to file their income tax returns by Tuesday's deadline, Lt. Gov. Pat Quinn Sunday denounced the state's unfair tax code and demanded tax relief for everyday people who need it most.

"Across the Land of Lincoln, hard-working people are sitting at kitchen tables, filling out their tax forms, and wondering how they're going to make ends meet," Quinn said at a news conference at on Sunday, "Our taxpayers deserve immediate action to provide tax relief and fundamentally reform Illinois' regressive tax code."

Quinn said any changes in the state's tax code must include the Illinois Tax Reform and Relief Act of 2007, a plan to expand the value of the state income tax's personal exemption and offer working families a more generous Earned Income Tax Credit (EITC).

"There's an age-old principle of tax fairness - taxes should be based on ability to pay," Quinn said. "Instead, Illinois' `soak the middle class' approach has given us one of the ten most unfair tax codes in the country. The Illinois General Assembly needs to pass the Illinois Tax Reform and Relief Act of 2007 and stop levying an unfair tax burden on working families."

As a first step, Quinn called on the legislature to expand the value of the personal exemption from $2,000 to $3,000 for tax year 2007, with further phased-in expansions to reach $5,000 by 2009.  For a family of four, the improved personal exemptions next year would result in a tax cut of $120 - enough for a trip to the grocery store.

            In 1969, when the Illinois income tax was enacted, the personal exemption - the basic exemption granted to every taxpayer and each of his or her dependents - was set at $1,000, or $4,000 for a family of four.  In tax year 2000, that basic exemption rose to $2,000, where it stands today.

            "If the personal exemption of $1,000 in 1969 had been properly indexed to inflation, it would be worth $5,544 in today's dollars," Quinn said.  "Compared with the current personal exemption of $2,000, that means the exemption's value in real dollars has dropped by almost two-thirds - and Illinois taxpayers are forking over the difference in their state income tax returns."

Thanks to the state's failure to index the personal exemption to inflation, a family of four this year will face a "stealth tax" of $424, Quinn said.

The Illinois Tax Reform and Relief Act of 2007 also includes a substantial expansion of the state of Illinois' Earned Income Tax Credit.  

            The state's credit is based on the federal EITC, a refundable credit of up to $4,400 granted to working families with incomes of less than $37,263. Although most states offer an EITC of 15% to 30% of the federal amount, Illinois' EITC is set at 5% of the federal credit, for a maximum of $220.

The state should double the value of its EITC to 10% of the federal credit in tax year 2007, and should phase in the expansion to 20% of the federal credit over the next three years, Quinn said.

"Illinois has the lowest state EITC in the nation," Quinn said. "The Earned Income Tax Credit is the best pro-job, pro-family, anti-poverty tax relief plan ever devised. By offering a more generous EITC of 20% of the federal credit, up to $880, we will bring Illinois up to par with other states and help working parents lift themselves and their children out of poverty."

            Quinn said the Illinois Tax Relief and Reform Act of 2007 would cost about $425 million in the next tax year.  That loss of revenue could be offset if the Legislature closed the many tax loopholes that allow major corporations to evade their fair share of the state's income tax.

To make it easier to close tax loopholes, Quinn has proposed the Taxpayer Action Board Initiative.  Under his plan, the Illinois General Assembly would create a board of review to identify and abolish lucrative corporate tax loopholes and avoidances.

The new board - a bipartisan panel to be named by the legislative leadership - would then present their full set of recommendations to the Illinois House and Senate for an up-or-down vote. If the Legislature did not vote against the Taxpayer Action Board recommendations, the proposed loophole closures would become law.

"Under this mechanism, legislators would no longer be subject to pressure from high-paid lobbyists and powerful special-interest groups to protect individual unfair loopholes," Quinn said.  "Instead, those loopholes would close in one fell swoop, allowing us to give tax relief to the everyday people who deserve it most."

A study by the non-partisan Institute on Taxation and Economic Policy found that Illinois overall has one of the ten most regressive tax codes in the entire nation. The study found that the top one percent of Illinois families - people with average incomes of $1.3 million a year - end up paying only 4.6% of their income in state and local taxes.

 Middle-class families - those earning $30,000 to $48,000 a year - pay about 10% of their total take-home in state and local income, sales, and property taxes, the study found.

But the lowest-income families in Illinois - those earning less than $16,000 a year - wind up paying more than 13% of their total income in taxes to their state and local governments.