01/08/2011 01:23 pm ET Updated May 25, 2011

Illinois Income Tax Hike Unlikely To Pass, As Momentum Shifts

For a moment Friday, it seemed as if it might actually happen. Governor Quinn, Speaker Madigan and Senate President Cullerton had reached an agreement to raise the state's income tax temporarily, boost corporate and cigarette taxes, and close the state's $15 billion budget gap.

Cullerton was excited about getting the state's $8 billion in unpaid bills squared away and putting that money back in the economy. Education advocates were excited for the $700 million that was to be set aside for the state's schools. Even bond investors, who have been downgrading Illinois's bond rating like it was a bad mortgage, were excited to invest in the state's debt, because it looked like they'd be getting paid off promptly.

Not so fast, everybody. By the end of the day Friday, the plan looked essentially dead in the water.

Lawmakers went back home Friday having made no progress on the tax question, and with apparently little hope for its future. Frank Mautino, a Democratic state representative and budget guru, told the Chicago Tribune that the "votes aren't here in the House yet. There's not 60 votes."

Turns out that after a bit of closer scrutiny, the plan has its share of problems. Some lawmakers, like Republican Jim Durkin, argued that Illinois families simply wouldn't support a 75 percent increase -- from 3 to 5.25 percent -- on their tax rates, calling the idea "a fly on an elephant's rear."

Then there's the corporate tax rate. It, too, would have risen 75 percent, from 4.8 to 8.4 percent. But corporations in Illinois also pay a so-called "personal property replacement tax" of 2.5 percent, meaning that the total rate would have been a whopping 10.9 percent. As the Capitol Fax blog reported, the Tax Foundation said that would be "the highest combined national-local corporate income tax in the industrialized world."

And then there's property taxes. The Democrats' plan would have replaced a property tax exemption with a $325 refund check to homeowning taxpayers. But as the suburban Daily Herald reports, that check wouldn't be much for lots of homeowners, and for many, it would actually be a tax increase, as the exemption was worth more than that to them.

So why did Speaker Madigan, always a shrewd vote-counter and rarely one to let his members get away from him, support the plan if he knew his fellow Democrats weren't behind it? Rich Miller from the Capitol Fax is suspicious.

"You really gotta question whether the leaders (or Speaker Madigan, at least) just put this gigantic tax hike mess out there to let the media and angry constituents kill it before members come back to town," he writes. "We'll have to wait and see what happens, but this proposal looks worse every time a new rock is kicked over."

Whatever the motivation, it appears that the hike is indeed dead in the water for now. In a lame-duck term marked by a handful of major legislative successes for Governor Quinn, this one sure has to sting.