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Illinois House Rejects Tax Relief for Businesses

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Springfield, IL
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SPRINGFIELD, Ill. (AP)  – Lawmakers came to the Illinois Capitol to pass major tax relief but failed in dramatic fashion Tuesday when the legislation, meant to keep high-profile businesses from abandoning the state, was overwhelmingly rejected in the House.

Facing an impasse, both the House and Senate adjourned their special session and went home until negotiators come up with a new proposal.

“This is not going to happen tonight,” Rep. John Bradley, a Marion Democrat who has led talks in the House.

The package included about $85 million in tax relief for financial companies CME Group Inc. and CBOE Holding Corp., both of which have threatened to leave Illinois, and a $15 million tax break each year for the next decade for Sears Holdings Corp., which also says it might leave.

It would have provided other breaks for businesses in general and a bit of tax relief for individuals.

Lawmakers did get some things accomplished.

Both the House and Senate approved a plan to tinker with the budget so that Gov. Pat Quinn would cancel plans to close seven state facilities and lay off about 1,900 employees. The legislation, which Quinn supports, shifts money in the budget but doesn’t increase overall spending.

They also sent the governor legislation meant to curtail abuses of public pension systems. It would bar employees from earning pension credit while on leave working for unions, and also prohibit employees from “double-dipping” by getting credit from union pension systems and public systems at the same time.

The measure also attempts to cancel pension benefits for two Illinois Federation of Teachers lobbyists who qualified for teachers’ pensions by spending just a single day in the classroom as substitutes. That could run into constitutional roadblocks, however.

Tax relief was the marquee issue for lawmakers, who are feeling the heat from businesses after raising income taxes early this year.

The House and Senate produced slightly different versions of the tax package. The key differences involved help for working Illinois residents. The Senate package had a more generous credit for low-income workers and a higher personal income tax exemption level than a House measure.

The Senate approved its version 36-18, but it flopped spectacularly in the House. Only eight lawmakers voted for it, while 99 opposed it.

Some lawmakers complained that poor families would receive only minor relief through the earned-income tax credit. Both the House and Senate versions provided a smaller increase than the governor originally proposed.

“Everybody has gotten everything that they wanted except the EITC,” said Rep. Will Davis, D-Homewood.

Others suggested the two trading companies made their case but that Sears didn’t demonstrate why it needed state help.

“It is our hope that lawmakers will achieve a compromise very soon as our timeline for making a decision about our future by the end of the year has not changed,” said Sears Holdings spokesman Chris Brathwaite in a statement.

The lopsided House vote may not reflect the proposal’s actual level of support.

Lawmakers who are willing to back a contentious measure sometimes wind up voting “no” once it becomes clear the bill won’t pass. It’s still possible another version could be considered and would get more support, although reaching the 60 votes it needs will be a major task.

In addition to helping big-name companies that are threatening to leave, the package included a variety of breaks that apply to Illinois businesses in general, including a research-and-development credit, and changes in the way losses can be applied to tax bills.

In the Senate version, families would get about $110 million in tax relief.

The standard personal exemption on income taxes, now $2,000, would be bumped to $2,050 and then increase with the rate of inflation in future years. The state version of the earned-income tax credit for poor families would rise to 10 percent of the federal credit, up from 5 percent.

The House version, which never came to a vote, didn’t link the personal exemption to inflation and offered an EITC of just 7.5 percent.

Republican Sen. Matt Murphy of Palatine supported the relief package but said it’s tiny compared to the tax increase worth nearly $7 billion.

“That hardly qualifies as a deck chair on the economic Titanic you created in January,” Murphy said.

Senate President John Cullerton said companies such as CME shouldn’t take rash action and pull up stakes in Illinois because of the legislative impasse. He said there’s still time to work on a deal, even if doesn’t happen until early next year.

“I would say that one chamber of the Illinois General Assembly passed a bill with strong bipartisan support and that they should then focus their attention on House members,” Cullerton said.

After the measure failed, Republican Rep. Roger Eddy of Hutsonville blasted Democrats for raising the income tax in the first place and causing companies to seek individual relief plans from the lawmakers.

“That’s the real issue here. That’s what put us in this situation,” he said.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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