SPRINGFIELD, Ill. – Not everyone is satisfied with Governor JB Pritzker’s budget proposal. But the pain, profound cuts, and general tax hikes that the Democrat had forecast after last fall’s failed amendment to generate more income tax revenues have not materialized.
Instead, last month’s spending plan that lawmakers will be considering in the coming weeks is devouring a projected deficit of $ 2.6 billion by cutting spending by $ 400 million and taxes of $ 1 billion $ 1 billion raised by eliminating what he called “unaffordable” business loopholes There were no loopholes when he signed them into law two years ago.
Pritzker had set his hopes for an additional $ 3 billion for the budget through a constitutional amendment that would have adjusted tax rates to hit the rich harder. It was defeated in the November elections. So he wants to save $ 931 million through changes in tax law. Critics are against the nomenclature.
“It’s a premeditated sham,” said Rob Karr, president and CEO of the Illinois Retail Merchants’ Association. “A loophole is some kind of clever lawyer or accountant who works around something that was not intended. All of this was discussed, passed, and passed by seated assemblies and a governor. ‘
Illinois expects $ 7.5 billion from the federal government’s latest COVID-19 relief plan. However, there are as yet undisclosed rules for the issue. In his February budget address, Pritzker said the money would have to pay off overdue bills and other debts – and “whatever is left must be used to invest in job creation and economic growth.”
Here are the tax incentives Pritzker would remove or adjust for the fiscal year beginning July 1, and the amount of money generated:
Net Loss Deduction Cap ($ 314M)
Business loss deductions would be capped at $ 100,000 per year for three years. However, the Pritzker government has indicated that limited losses may be carried forward in the short term. This emerges from an analysis published by tax attorneys at Chicago law firm Sidley Austin, which resulted in an interest-free loan from Illinois corporations to taxpayers. ‘
According to Pritzker, 80% of companies with losses would not be affected by the limit. However, in business interests, this is the worst time after a year of red ink delivered by the COVID-19 pandemic.
REDUCED ACCELERATED DISARMAMENT OF EQUIPMENT ($ 214M)
The 2017 Federal Tax Cuts and Jobs Act allowed a company that buys a device to deduct its entire value from taxes at once. Typically, the depreciation occurs over an extended period of time that Pritzker’s plan would dictate. Again, it is postponing the trigger so that it is not a long-term saving for the state.
Mark Denzler, President and CEO of the Illinois Manufacturers’ Association, argues that COVID-19 forced purchases of equipment for both patriotic and practical purposes.
“It was for sanitary purposes, cleaning facilities or with many manufacturers, they bought new equipment to respond to the pandemic, so that they could provide face masks or face shields or make ventilators,” said Denzler.
BIODIESEL EXCEPTION expiry (USD 107 million)
Illinois is one of only about half a dozen states that levy sales tax on fuel. Since 2003, Illinois has been saving diesel fuel made with at least 10% biodiesel, a by-product of soybeans. The law is due for renewal in 2023, but Pritzker wants to end it now.
It’s allowing Illinois, a chessboard of highways and railways that carry cargo, to remain competitive with its neighbors, supporters say. If the state levies its 6.25% sales tax – and all sales that levy state taxes can be levied by local governments – it could mean significantly fewer jobs in the agro and biodiesel industry, said Josh Sharp, executive vice president President of Illinois Petroleum Marketers.
“People will go around Galesburg and go to Iowa, they will go around Edwardsville and go to St. Louis,” Sharp said.
RETAILER DISCOUNT CAP ($ 73M)
Retailers must collect and submit the tax levied on their sales for both state and local parts to the state. You can keep 1.75% of this collection for a refund. Pritzker would cap this amount at $ 1,000 per month. When making similar suggestions in the past, he argued that only the largest retailers charge collection costs in excess of $ 1,000.
Karr from the retail group points out that the current reimbursement only covers 44% of retailers’ collection costs. Many fear that the $ 1,000 cap will now continue to decrease.
MANUFACTURER PURCHASE CREDIT ($ 56M) and CORPORATE FRANCHISE TAX ($ 30M)
Pritzker would end a tax break he signed in 2019 to extend manufacturers’ purchase credit and include products that are used in production but are not part of the final product, such as: B. heating oil or lubricants.
And he bragged about saving 317,000 businesses in tax by eliminating the Corporate Franchise Tax, an operating fee dating back to 1872 that has been criticized as anachronistic and burdensome. His plan would cancel his exit.
TAX CREDIT FOR PRIVATE SCHOOL SCHOLARSHIPS
An attractive tax credit of 75% for the contribution to scholarships for private schools has been included in the groundbreaking legislation on the 2017 educational reform. Pritzker suggests reducing it to 40%.
In three years, donations have reached $ 127 million to provide 16,000 on-demand scholarships to students in 650 participating schools, including Catholic, Jewish, Montessori, and Christian schools, said Robert Gilligan, executive director of the Illinois Catholic Conference. White students have received 45% of the scholarships, 39% go to Hispanic students, and 17% to black children.
But there are 25,000 others waiting in line, Gilligan said. Reducing credit would likely reduce donations and grants.
Other initiatives suggested by Pritzker include generating $ 107 million from realigning the tax treatment of foreign-sourced dividends with domestic-sourced dividends, a change from the 2017 Tax Act, and saving $ 16 million from the discontinuation another Illinois law of 2019 that he signed to encourage investment in high-paying blue-collar jobs. Pritzker is slated to start January 1 and has postponed it because of the pandemic.
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