Tight budget blocks tax break ideas in Illinois

SPRINGFIELD, Ill. -- Got an idea to put a little money back in the pockets of Illinois taxpayers? Chances are good state lawmakers already are pursuing it this year.

From offering incentives to buy hybrid vehicles and school supplies to encouraging businesses to expand or locate here, legislators are pushing dozens of ideas that would provide breaks from a variety of state taxes.

But lawmakers' desire for the feel-good measures in an election year likely won't save the proposals from the scrap heap. A tight state budget makes every dollar valuable this year, and some key lawmakers say there's no room to give much back.

"I wish we could do all these things, but we just fiscally can't," said Rep. John Bradley, D-Marion. "It's a tough job because they're good ideas, but you have to say no."

Legislators backing the tax breaks say they understand the problem but won't back down when told "no."

"I'm going to keep working this thing until those bills get heard," said Rep. Susana Mendoza, D-Chicago.

The measures sitting in revenue committees in both the House and Senate cover the gamut of money-back ideas. Tax break measures are especially popular in election years because lawmakers can tout them back home, even if they never become law.

Many of the ideas have been proposed and killed before, or are expansions of previous breaks. Senior citizens could see lower property tax bills and income tax breaks for prescription drug coverage. Military veterans, farmers, volunteer firefighters and organ donors also would benefit.

But some lawmakers are going down different paths, arguing Illinois needs to take some chances to see potentially big gains.

Mendoza is pushing two measures aimed at making Illinois a major player for biotechnology companies. One would provide an income tax credit for investors in biotech companies. The other would give a tax deduction based on patents stemming from inventions made in Illinois.

Mendoza says she's pushing the plans to keep ahead of neighboring states like Indiana and Wisconsin, which are turning to incentives to entice biotech companies. She acknowledges her ideas might get blocked this year but says she'll keep working to get them passed.

"Illinois is poised to be a leader in this internationally, and we should be ahead of the curve instead of behind it," Mendoza said.

Hybrid vehicle purchasers would not pay state sales tax under a plan backed by Rep. Tim Schmitz. Another Schmitz idea would create a sales tax "holiday" on school supplies for 10 days in early August.

"I'm trying to show that you put some of these incentives, people actually go out and buy things," said Schmitz, R-Batavia.

Sen. James Clayborne is pushing the school supplies tax holiday in the Senate. He's including some computers, clothing and footwear in his version, along with the usual pens, paper and backpacks.

He says it's especially needed in his St. Louis-area district to compete with Missouri, where he sees packed parking lots as both Missourians and Illinoisans stock up with supplies on that state's tax "holiday" each fall.

The $33 million estimated cost is steep but could bring in much more from out-of-state buyers, he argues.

"It helps families who may not be able to afford all those things," said Clayborne, D-Belleville. "There's quite a few benefits that we really need to look at and analyze."

Legislators aren't the only ones pushing tax breaks. Gov. Rod Blagojevich last month proposed providing more than $1 billion in one-time tax credits to Illinois families and businesses. At the same time, the governor is asking lawmakers again to end some existing tax breaks for businesses that he considers costly "corporate loopholes."

With lawmakers about halfway through their scheduled spring session, the House and Senate are viewing tax break measures skeptically but taking different approaches.

Bradley's revenue committee in the House is sending the ideas to subcommittees for further review, which Mendoza calls the "kiss of death." Bradley says some may resurface later in the session as the budget is put together but many will remain "bottled up."

That's because the state's current budget is about $750 million in the hole, and projections for next year show revenue coming into the state slowing while expenses continue to grow by hundreds of millions of dollars.

"I think it's our job to try to be stewards of the people's money and to make sure that the state doesn't get in any larger fiscal crisis than it already is," Bradley said.

A taxpayer watchdog group is using the same logic in asking lawmakers to reject any bills this year that would reduce government's tax proceeds.

David Eldridge, legislative director for the Taxpayers Federation of Illinois, says lawmakers have asked him to not oppose their ideas, but he gives them the same answer: "There's just no money, and it's not the right time to be doing new programs."

The Illinois Chamber of Commerce is pushing lawmakers to consider incentives for business investment and research and development but hasn't weighed in on many other ideas largely because of their bleak future.

"The straight-up political reality is we know that most of them are not going to get out and we don't spend an awful lot of time (on them)," said Todd Maisch, one of the chamber's lobbyists.

The Senate Revenue Committee is avoiding the blanket thumbs-down. Its chairman says the committee is closely scrutinizing the ideas and advancing ones worth further study.

Sen. Don Harmon, D-Oak Park, acknowledges that breaks worth significant amounts of money will face a difficult road.

Harmon says he won't reject ideas that show the promise of providing a great benefit for an initial upfront cost, including credits that could spur business growth here.

"It's going to take a strong argument, without a doubt," Harmon said. "But some of these proposals could pass that threshold. There are ways to use tax credits in a judicious way to spur development."