State Rep. Lang proposes making income tax increase permanent - FOX 29 News Philadelphia | WTXF-TV

State Rep. Lang proposes making income tax increase permanent

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CHICAGO (FOX 32 News) -

A member of Ill. House Speaker Mike Madigan's team proposed on Wednesday to make the state income tax increase that is scheduled to expire next year permanent, as part of a deal to pay for public employee pensions.

The public employee unions did not necessarily say they were on board with this proposal. But the suggestion is another sign that Illinois taxpayers need hold on their wallets. The cost of public employee pensions has been eating into the state budget more than one would think.

Democratic State Rep. Lou Lang proposed making the increase in Illinois income tax – from 3% to 5% - permanent, to fund public employee pensions. The increase is currently scheduled to expire at the end of 2014.

"It extends the 2 %income tax increase," Lang said, "and requires that all of the additional dollars brought in from the increase be applied to the pension systems."

That would be about $7 billion. The state is facing a $96 million deficit.

The problem is that just about every single penny from that income tax increase is already going to pay for the cost of public employee pensions. The state treasury is going to need billions more in years to come, to pay for it all.

There would also be some trade-offs on the part of public employees under the proposal. They would have to pay an additional 3% of their wages to support the pensions.

In the future, for example, suburban and down state school systems would be responsible for paying their contributions to teacher pensions. State taxpayers would no longer have to pick up that cost.

Many folks in the Western Suburbs do not want the tax increase extended.

"Bad idea!" says Westmont resident Mahesh Patel. "Because right now the economy is so bad."

"I think it's a terrible idea," says West Suburban resident Dave McCurdy.

When asked if the 2 percent affects him, McCurdy responded, "Yeah, just for pensions! It affects me. I have 2 young boys."

"Even those who will be the angriest about this will tell you the State of Illinois is in dire straits and needs the cash," says Rep. Lou Lang.

Kirk Dillard, who studied Lang's proposal Wednesday evening, is among a half-dozen Republicans ready to run for governor on a pledge to veto any extension of that tax increase.

"That income tax increase needs to be scaled back and rolled back," Dillard says. "The Democrats promised it would be temporary. It is a job killer. Companies are fleeing Illinois. People are moving out of here at the rate of a million people every decade."

Rep. Lang insisted, though, that after decades of pension fund mismanagement, there's no alternative to raising taxes.

"The taxpayers of Illinois didn't create the problem. They're stuck with the problem," Lang says. "And there's a lot of places you can blame for how we got to where we are."

Gov. Pat Quinn did not say whether he supports extending the tax hike when asked Wednesday. But the Democratic governor said the pension crisis can't be fixed with just more money.

Lang's proposal also sets retirement age at 67.

The Associated press contributed to this report.

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