Illinois Passes 66% Tax Hike

Illinois Governor Pat Quinn -- illinois tax
Illinois Governor Pat Quinn -- illinois tax

Lawmakers in Illinois moved quickly yesterday, Jan. 12, to pass a new bill that increases the state's personal income tax rate by a whopping 66%. This appears to be the largest tax increase any state has approved in the wake of recent economic woes.

Newly-inaugurated Illinois Governor Pat Quinn has publicly defended the move to raise taxes, citing the state's dismal financial picture and budgetary shortfalls, which are expected to expand as stimulus spending comes to an end this year. The new legislation will increase the current 3% rate to 5% for the next four years and includes an increase in income taxes assessed on corporations.

With a budget deficit hovering at nearly $15 billion, there's no question that Illinois has its back against the wall and needs to make meaningful changes to its fiscal policy. While tax increases are seldom popular politically, it seemed a foregone conclusion that Illinois would utilize tax changes along with budget cuts to start making a dent in the current deficit and rein in future spending. It came down to yesterday morning, when the lame-duck legislature finalized the deal before new lawmakers were scheduled to be sworn in mid-day.