04/24/2010 05:12 am ET | Updated May 25, 2011

Illinois Budget Crisis 2010: Civic Federation Says Only Big Tax Hikes Can Fix 'Horrific' Budget Problems

Are massive tax hikes coming to Illinois? A government watchdog group says if the state wants to "become solvent," tax hikes and $2 billion in budget cuts are the only way to go.

The Civic Federation, one of the state's most prominent tax watchdog groups, released a report Monday saying that raising the personal income tax rate by 66 percent--among other hikes--is the only way Illinois can repair its "horrific" financial situation, the Chicago Sun-Times reports.

The Civic Federation recommends that the state income tax be increased from 3 percent to 5 percent for individuals, that retirees' pension and Social Security checks be taxed for the first time at the same rate as workers' paychecks, and the tax on cigarettes be raised by another $1 per pack. The group also favors getting rid of $181 million in corporate tax breaks.

"Doomsday is here for the State of Illinois," Civic Federation President Laurence Msall told the Sun-Times.

The Civic Federation's recommendation comes at a bad time for Gov. Pat Quinn--with an upcoming election, a recession and many Illinois families struggling to get by. But the state's $12.8 billion budget deficit that that has stopped the flow of cash to universities and schools, transit systems and social-service agencies is going to force Quinn and the state Legislature to make painful choices.

"Illinois' financial crisis was not created by the great recession," Msall told the Chicago Tribune. "It is a self-made crisis fed by a lack of responsibility." The Tribune reports:

Msall said his group's proposal, if adopted in full, would lop more than $10 billion off the deficit for budget year 2011. He also conceded that some of the red ink would have to be rolled into the following budget year before being erased in its entirety. It estimated the income tax hikes alone would raise $6 billion in new state revenue, while another $1.6 billion would be generated by requiring retirees for the first time to pay taxes on retirement income.

But will state officials go through with the Civic Federation's plans? Quinn's office wouldn't comment on the new report, saying only to the Sun-Times that he plans on "working with the group during the upcoming budget debate." Speaker Michael Madigan's spokesman said that Madigan supports cigarette tax increases, and that Illinois Republicans have "done nothing" to help the state's financial situation but continue to vote down any tax increase proposals.

"It's not sustainable to continue to ignore your vendors," Msall told the Sun-Times. "It's not sustainable to ask your schools, local governments and homes for the developmentally disabled to go out to the market to borrow" because the state isn't fulfilling its funding promises, Msall said. "A failure to effectively address this crisis in a comprehensive form will result in not only lost opportunities but in greater pain."