UPDATE: January 13 at 4:01 p.m.
Gov. Pat Quinn has signed legislation that temporarily increases the Illinois income tax rate by two-thirds.
The move is meant to help close a $15 billion budget deficit that threatens to cripple state government.
The increase means individuals will now pay 5 percent instead of 3 percent. The corporate rate jumps from 4.8 percent to 7 percent. The tax law also includes spending limits.
The full increase is supposed to last just four years. After that, the rates will fall but not all the way back to their original level.
Democratic leaders say new spending caps will ensure the money is handled carefully.
Republicans aren't convinced, however. They say the caps are too generous and include some possible loopholes.
What this means for the average joe is that the new tax money can be used to pay long-ignored government obligations, but afterwards spending can't climb by more than 2 percent a year. If officials spend more, the tax increase is automatically reversed.
Republicans argue the caps allow spending to grow too much in the first year. They also claim Democrats could create new government funds that would be exempt from the caps.
What do you think? Is this just asking for trouble? Join the discussion on our Facebook page.
UPDATE: January 12 at 3:51 p.m.
If you live in Illinois, your spendable income is about to get smaller.
Democrats in the Illinois Legislature on Wednesday approved a 66 percent income-tax increase in a desperate and politically risky effort to end the state's crippling budget crisis.
The increase now goes to Democratic Gov. Pat Quinn , who supports the plan to temporarily raise the personal tax rate to 5 percent, a two-thirds increase from the current 3 percent rate. Corporate taxes also would climb as part of the effort to close a budget hole that could hit $15 billion this year.Read more Senate votes on tax hike House votes on tax hike Illinois Statehouse News: Legislature passes tax hike
"This is definitely a bad thing for the business community," said Amy Looten with the Chamber of Commerce.
This new tax increase is a change that will soon reflect on your paycheck and your job. The bigger your employer, the more taxes it has to pay, leaving businesses like Knapheide Manufacturing concerned for the future.
"The last thing we need is added costs. And, you know, we've made the necessary cuts to get through this period and unfortunately, the state has not. And now we're paying for it," said Knapheide Vice President Bo Knapheide.
"All of those jobs that the state of Illinois is going to get all of that additional income from, they're all tied to those jobs that might be forced out of the state, and then that would also impact the personal income tax," said Looten.
"We're being hit with a lot of things and unfortunately our state can't be sensible right now," said Knapheide. "It's coming at a time where things are extremely competitive out there. Everybody wants every single deal and that's putting us at a competitive disadvantage. It's not fair and we deserve better, and hopefully people are outraged, as they should be."
One international company based in Quincy is already making moves to potentially move out of the state.
"We have kept our headquarters in Quincy, but since they have passed this, we are going to put a team together to move our corporate headquarters. You have to do that," said Morry Taylor, the CEO of Titan Wheel International. "They haven't solved the problem. They're going to still have a problem.You shouldn't have state employees unionized. How to create jobs? Hell, the state is a joke. The politicians are the biggest joke and for all the folks who voted for the man? Think now. I like Quinn as a man, but a school teacher to run the state? Maybe people will wake up. I bet Boeing and Caterpillar and ADM are rethinking their decision."
Pam Thurman says on our Facebook page, "Businesses WILL move out of IL! I agree with David Foote that a higher sales tax is the answer. In Chicago area, it is nothing to pay 9.25-9.5% sales tax. Quincy, IL is 7.75%. Sales tax applies to everyone also. It is more FAIR!"
Under the bill, the state will be held accountable, placing 2 percent limits on spending. if it's violated, the tax increase cancels automatically.
In case you missed it, visit our Facebook page here.
January 12 at 3:49 p.m.
We have been following this story all day and you told us you don't like the tax increase. You don't think it will work.
On our Facebook page we are seeing the following comments:
Hollie Perry said, "All I know is that with a husband on unemployment, me working part-time while we both are full time students --this is NOT going to help our household with 5 kids to raise!"
Angie Wirsing Mecklenburg says, "No, this will not fix the budget problem. People having less disposable income never fixes a budget problem. Couple this with the highest corporate taxes in the free world and Illinois will find more and more businesses closing their doors or moving out of state. That in turn will raise unemployment rates which we all know does nothing for creating revenue. Nice idea, Dems."
The big question here is what will work? What should we do?
On Facebook, David Foote said, "SALES TAX!!!! its the only fair way to raise revenue. everyone pays not just a few. yes the state is broke,,,yes we have to raise taxes,,,but selectively raiseing taxes will only dirve those they are taxiing,,out of state!"
KHQA's Brooke Hasch will bring you more details, so check this story later and watch KHQA's News at Five, KHQA's Evening News at 6 p.m. and KHQA's Late News at 10 p.m.
We now know that Democrats in the Illinois Legislature on Wednesday approved a 66 percent income-tax increase in a desperate and politically risky effort to end the state's crippling budget crisis .
The increase now goes to Democratic Gov. Pat Quinn , who supports the plan to temporarily raise the personal tax rate to 5 percent, a two-thirds increase from the current 3 percent rate. Corporate taxes also would climb as part of the effort to close a budget hole that could hit $15 billion this year.
Median personal income in 2010 for Adams County was $56,900. At the current 3 percent tax rate, a median-income earner faced a tax burden of about $1,700 prior to any deductions. With a new tax rate of 5 percent, that tax bill jumps to more than $2,800 before deductions (Median income source from eFannieMae.com ).The higher taxes will generate about $6.8 billion a year, Quinn's office said - a major increase by any measure. In percentage terms, 66 percent might be the biggest increase any state has adopted while grappling with recent economic woes.
It will be coupled with strict 2 percent limits on spending growth. If officials violate those limits, the tax increase will automatically be canceled. The plan's supporters warned that rising pension and health care costs probably will eat up all the spending allowed by the caps, forcing cuts in other areas of government.Other pieces of the budget plan failed.Lawmakers rejected a $1-a-pack increase in cigarette taxes, which would have provided money for schools. They also blocked a plan to borrow $8.7 billion to pay off the state's overdue bills, which means long-suffering businesses and social-service agencies won't get their money anytime soon.House Speaker Michael Madigan, sounding weary, said Republicans should have supported some parts of the plan instead of voting against everything.Join the conversation on our Facebook page here .