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Quinn Calls For Tax Increases In Budget Address As Illinois Faces 'Greatest Crisis Of Modern Times' (WATCH)

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UPDATE 3/19

Gov. Quinn took to the road to promote his new budget plan a day after introducing the proposal, which calls for a major income tax increase along with increased exemptions, under the theme of "shared sacrifice."

From the AP:

PEORIA, Ill. - Gov. Pat Quinn is telling taxpayers they must make sacrifices in order to boost the Illinois economy and keep vital state services intact.

Quinn was scheduled to visit several downstate cities Thursday and Chicago on Friday to promote his budget proposal, which includes higher taxes and fees.

His first stop was in Peoria, where he said Illinois should no longer be a "deadbeat state" that doesn't pay its bills.

Quinn acknowledges some voters will take a hit in the pocketbook under his plan. But he says they'll trade their tax dollars for better education, continued health care for seniors and services for veterans.

About 100 people showed up at his Peoria appearance, and many of them urged Quinn to focus on downstate issues.

Also Thursday, state Senate President John Cullerton said that a temporary tax hike, rather than the permanent one Quinn put forth, could be a necessary compromise, the Tribune reports:

When asked by a reporter if he would consider a temporary income tax hike this spring instead of a permanent one, Cullerton said "sure."

"So that's something which could be suggested, if people were actually willing to vote for it, if that's the condition that helps get the 30 votes we need to pass it too," said Cullerton, talking about the number of votes to get legislation approved in the 59-member Illinois Senate.

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SPRINGFIELD -- Facing an unprecedented financial crisis, Gov. Pat Quinn proposed a budget that asks for "shared sacrifice" from a long list of Illinoisans: state employees, smokers, drivers and everyday taxpayers.

"To be direct and honest: our state is facing its greatest crisis of modern times," Quinn told lawmakers in formally presenting his budget Wednesday.

He tried to soften the blow by expanding a tax break that mostly benefits the poor and middle class, arguing millions of families would end up paying less under his proposal. Quinn also wants a sales tax "holiday" to help parents pay for back-to-school supplies.

Quinn asked lawmakers to support a $26 billion construction program that would build new roads, bridges and schools around the state, supporting some 340,000 jobs. Paying for the massive initiative would mean raising the fees for driver's licenses, license plates and title transfers.

Quinn voiced support for another major--and controversial-- construction project: a third Chicago-area airport in the south suburbs.

The governor earned hearty applause when he told lawmakers that the airport would be built "as fast as humanly possible."

Quinn says the proposed Will County airport is part of much-needed economic development efforts around the state.

Last year, state officials submitted updated plans to the Federal Aviation Administration for the airport, which supporters say will stimulate the local economy.

U.S. Rep. Jesse Jackson Jr., an airport backer, says he's encouraged by Quinn's comments.

Quinn also wants smokers to pay more. He proposed increasing the tax on cigarettes, now 98 cents a pack, by an additional $1 over two years.

The governor knew he was asking a lot of lawmakers heading into an election year, telling those who offered a warm welcome as he took the podium: "I hope you're applauding at the end of this speech."

Quinn also clearly hoped to remind lawmakers -- and voters -- of the good will he has built up before and since his predecessor, Gov. Rod Blagojevich, was kicked out of office over corruption allegations.

"As we prepare for a better future, we must also make tough choices about cleaning up government right now," Quinn said during his Wednesday address. "Ethics reform is of paramount importance to me and the people of Illinois."

Quinn's budget plan is bound to trigger a battle with AFSCME, the influential union that represents state employees. He wants state employees to pay more for health care, take four unpaid furlough days and accept reduced retirement benefits in the future.

The Illinois Federation of Teachers made its stance clear almost immediately after Quinn's address, stating in a release that it will not endorse any legislator who supports the state pension cuts.

With an $11.5 billion deficit to erase, Quinn's budget contains few bright spots.

There's no money to reopen historic sites closed by his predecessor. Mental health grants would drop by $12 million. Spending on senior citizens and disabled people will be held flat.

"This gap is too large to be addressed with any single measure whether it is spending cuts, revenue increases or federal recovery money," Quinn said in a letter to lawmakers.

Quinn inherited the budget mess following Blagojevich's ouster in January. He was suddenly scrambling to respond to a budget deficit that, driven by plunging tax revenues and increasing demand for services, seemed to be growing by the week -- from an estimated $7 billion to $9 billion to $11.5 billion.

His budget proposal showed signs of the rush. The official letter accompanying it talks about a construction program of just $26 -- leaving out the all-important word "billion."

The Chicago Democrat portrayed his budget as an alternative to Blagojevich's "show-biz" approach.

But his budget proposal depends on cutting some corners.

It would lower this year's contributions to pension systems by nearly $2.9 billion on the assumption that Illinois will save billions of dollars in coming decades by cutting retirement benefits for new state employees.

He also calls for dipping into special-purpose funds to pay for general expenses, keeping tax money that would otherwise go to local government and diverting money from the state road fund to help support the construction program.

That long-awaited construction plan also would be funded by raising the cost of license plates by $20, to $99, and doubling the $10 fee for a driver's license. Mass transit construction would get a boost from an increase in the vehicle transfer fee.

By one of the many ways to measure the state budget, Quinn's proposal would push spending to $52.9 billion in the fiscal year beginning July 1. That's up $2.1 billion, or about 4.1 percent.

Much of the increase comes from federal stimulus money the state will receive for education and Medicaid.

The governor has a tough sales job ahead of him. Many lawmakers are open to tax increases but only if they can show constituents how they will benefit.

Quinn is trying to demonstrate benefits by focusing on the increased exemption -- the amount of a family's income that is exempt from taxes. By tripling it to $6,000 per person, Quinn argues many families would benefit from his plan.

Any family of four making less than $60,900 a year would end up with a smaller tax bill, he says. But other taxpayers face a different picture. A single person making $60,900 would pay $630 more. A two-person household -- say, a single mother and her child -- would pay $420 more.

Republicans are generally opposed to an income-tax increase or a hike in the corporate tax.

Revenue from higher taxes will fall short of projections because people will change habits to shield income, said Rep. Mark Beaubien, R-Barrington Hills. Taxing businesses in this economy, he said, would be devastating.

"People won't expand their businesses, they'll leave the state," Beaubien said.

Quinn's proposed income tax increase is double that of the "temporary" hike called for by former Gov. Jim Edgar during another recession, in 1991, Greg Hinz notes on his Crain's blog.

The governor dismissed expanding gambling, which some GOP leaders have proposed as an alternative budget fix, calling it a "bad bet."

Quinn proposes raising the corporate income tax rate to 7.2 percent, generating $350 million. He also wants to end about $100 million in corporate tax breaks, a proposal that has often been rejected in the past.

"There's something wrong when our state gives more tax breaks to those who raise thoroughbred horses than it gives to parents raising children," Quinn said during his budget address.

A sales tax holiday would ease the burden on families. Quinn wants to lift the 5 percent sales tax for 10 days in August on certain school-related items. That would cost as much as $50 million, an amount made up by letting retailers keep less of their service fee for collecting the tax.

The administration estimates its income tax increase would bring the state an additional $2.8 billion.

House Speaker Michael Madigan has reservations about Quinn's tax hikes, the AP reports:

The Chicago Democrat says lawmakers will want to know which taxpayers will benefit under Gov. Pat Quinn's plan and which ones will end up paying more.

Madigan says voters will probably want to be certain that state government is cutting costs as much as possible before raising taxes. He says Quinn will need to do more to show that higher taxes are the only option.

Madigan also says he has an excellent relationship with Quinn. He says it's "6,000 times better" than his relationship with former Gov. Rod Blagojevich.

Madigan's stance on the tax increase will be closely watched as Quinn seeks legislative support for his proposals at the same time as Madigan's daughter, Attorney General Lisa Madigan, shows signs of using them as a wedge against Quinn in a potential gubernatorial primary.

Senate president John Cullerton called an income tax increase "very likely" but said that the size of the hike and the personal exemption are still up for negotiation. Cullerton also refused to rule out a gas tax increase, despite Quinn saying otherwise in his speech.

Click here to read the full text of Quinn's prepared speech.

Click here for a tax calculator to compute how Quinn's proposed tax hike will affect you.

Watch Quinn's address: