Bill Summaries

Property taxes: Circuit breaker

The circuit breaker provides property tax relief for persons over age 65 and disabled persons through grants based on income. These grants pay the individual's property taxes which are in excess of 4 percent of income, but an offset factor of 5 percent is applied to the income. The maximum allowed is $650, and income cannot be more than 510,000 annually.

H.8. 188, sponsored by Rep. Calvin L. Skinner (R., Crystal Lake) and Sen. John L. Knuppel (D., Petersburg), would increase the maximum income to qualify for the circuit breaker from $10,000 to $12,000 a year and would double the maximum grant to $1,200 a year. (Skinner's bill maintains the 4 percent income formula but drops the offset factor. Skinner's bill would make another 50,000 persons eligible, and the Illinois Department of Revenue estimates it would cost the state another $18.5 million a year. Skinner's bill passed the House 158-0 March 28 and is pending in the Senate Revenue Committee. It's unlikely, however, that Gov. Thompson would support this bill, despite its unanimous vote in the House, since its sponsor, a maverick suburban Republican, is one of his most outspoken critics.

S.B. 140, sponsored by Sen. John A. Davidson (R., Springfield) and Rep. J. David Jones (R., Springfield), would also increase the maximum income to qualify to $12,000. But Davidson's bill would increase the maximum grant by only $100, from $650 to $750. Davidson's bill maintains the 4 percent formula and the offset factor. Like Skinner's bill, Davidson's would make another 50,000 persons eligible, but the Bureau of the Budget puts a more expensive price tag on it: $23 million the first year. Davidson's bill passed the Senate unanimously, 54-0 May 24, and is pending on third reading (postponed consideration in the House. This is the only other Republican bill and it's the one Thompson is likely to use to push his circuit breaker proposal.

However, there are three Democratic circuit breaker bills which are identical: H.B. 329, sponsored by Rep. Edmund E. Kornowicz (D., Chicago) and Sen. LeRoy W. Lemke (D., Chicago); S.B. 967, sponsored by Lemke and Kornowicz; and S.B. 1338. sponsored by Sen. Robert J. Egan (D., Chicago) and Kornowicz. Each increases the maximum income to qualify by $5,000 to $15,000 a year, but maintains maximum grants at $650 a year. Each adjusts the formula to cover taxes at 3 1/2 percent, instead of 4 percent, and each reduces the offset factor by 1 percent. Since the Democrats predictably will push their own circuit breaker proposal, they are likely to pick one of these. S.B. 967 passed the Senate 35-14 May 21 and S.B. 1338 passed and 32-13 May 25, and both are on the third reading short debate calendar in the House. Kornowicz's bill is also in good shape, passing the House 90-16 April 19 and now pending in the Senate Revenue Committee.

H.B. 547, sponsored by Rep. John F. Sharp (D., Staunton) and Senate President Philip J. Rock (D., Chicago), would provide new circuit breaker grants to offset inflation-increased utility bills (fuel and electric) for seniors and others eligible for any other circuit breaker benefits. The maximum grants would be 75 percent of the annual increase in utility bills less 5 percent of household income, or $40, whichever is higher. Cost to the state is estimated at $16 million a year. Passage of Sharp's bill, which was co-sponsored by Majority Leader Michael J. Madigan (D., Chicago), depends on the part it plays in the Democrats' circuit breaker proposal and their overall tax relief plan. Sharp's bill passed 96-48 May 17 in the House and reached third reading in the Senate before the spring session deadline sent it back to the Public Health, Welfare and Corrections Committee where it must be reapproved before it can return to the floor.

Homestead exemption

Two homestead exemption bills, both Democratic, are significant, although they may be overlooked since Democrats doubled the homestead exemption on property taxes from $1,500 to $3,000 during January's special session.

H.B. 2032, sponsored by Rep. Daniel M. Pierce (D., Highland Park) and Sen. Samuel C. Maragos (D., Chicago), in effect, would replace the new $3,000 homestead exemption with an exemption tied to the inflation rate on the fair market value of home real estate throughout the state. The bill passed the House 124-32 May 23 and is pending in the Senate Revenue Committee.

Sales tax on food and nonprescription drugs

H.B. 2822, sponsored by Rep. Thaddeus Lechowicz (D., Chicago), would reduce the state sales tax on food from three to two cents and would drop the four-cent state and local tax on nonprescription drugs effective July 1, 1980. To offset the loss of sales tax revenue to local government, Lechowicz's bill increases local government's share of state income tax revenue from one-twelfth to one-eleventh, an increase of about 9 percent. Cost to the state is not available. Chicago Democrats, thwarted by Mayor Byrne last fall in their attempt to override the governor's veto of a bill similar to this one, are likely to pick Lechowicz's bill in their thrust to claim credit for any further sales tax relief this spring. Lechowicz's bill, introduced last fall, is pending in the House Revenue Committee.

H.B. 2899, sponsored by Rep. Lee Preston (D., Chicago), cancels the one-cent sales tax cut approved last fall by restoring the state tax on nonprescription drugs from three to four cents and dropping the four-cent state and local tax on food, specifically: meat, frozen foods, dairy products, fruits, vegetables and bakery goods. Preston's bill also would increase local government's share of state income tax revenue, but from one-twelfth to one-eighth, an increase of about 50 percent. Cost to the state is not available. Preston's bill is expected to attract some attention because it describes what is taxable and not taxable more specifically than the one-cent approved last fall. The bill is awaiting assignment by the House Rules Committee.

Other new bills awaiting assignment include: H.B. 2834, sponsored by Rep. Woods Bowman (D., Chicago), which phases out the three-cent state tax on food and nonprescription drugs over two years beginning September 1, 1980; H.B. 2682, sponsored by Rep. Fred J. Schraeder (D., Peoria), which also phases out the tax over two years, but beginning January 1, 1981; H.B. 2861 (Schraeder), H.B. 2868, sponsored by Rep. Virginia Fiester (R., Lake Forest), and H.B. 2898 (Preston), all of which cut the tax from three to two cents effective January 1, 1981. Bowman, a maverick Chicago Democrat, and Schraeder, a downstate Democrat, supported the Democrats' original override plan despite Byrne, but their bills don't carry the clout Lechowicz's does.

General sales tax

S.B. 860, sponsored by Sen. Gene Johns (D., Marion) and Rep. James F. Rea (D., Christopher), would exempt agricultural machinery and equipment from the state sales tax by phasing out the tax over four years beginning July 1, 1980. Cost to the state is not available. John's bill is a business incentive similar to the exemption approved two years ago for manufacturing machinery and equipment. Predictably, the Illinois Farmers Union is pushing for such an exemption. John's bill passed the Senate

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April 1980/Illinois Issues/25

Bill Summaries

35-5 May 21 and was heard before March 5 in the House Revenue Committee.

Income tax

Among dozens of bills detailing exemptions, deductions and credits for the income tax, three new bills, all awaiting assignment by the House Rules Committee, zero in on interest exemptions from the income tax. The cost to the state is not available.

H.B. 2892, sponsored by Rep. Mary Lou Sumner (R., Wyoming), would exempt all interest from deposits in banks, savings and loan associations and credit unions.

H.B. 2847, sponsored by Rep. Roman J. Kosinski (D., Chicago), would exempt all interest up to $1,000.

H.B. 2860, sponsored by Rep. Ralph C. Capparelli (D., Chicago), would exempt all interest on deposits of $10,000 or less by those 65 and older.

Corporate replacement tax

The new income tax surtax on corporations replacing the old corporate personal property tax took effect July 1, 1979. The replacement tax increased the income tax on corporations from 4 percent to 6.85 percent until January 1, 1981, when the increase drops to 6.50 percent. The replacement also increased the tax on partnerships by 1.5 percent and adds a tax on utilities' invested capital, at .8 percent. When the Illinois Supreme Court upheld the constitutionality of the replacement tax in November, justices ruled that it was not a new tax even though it will generate more revenue than the old. The Illinois Department of Revenue said the old corporate personal property tax is expected to generate $460 to $500 million in calendar 1979, while the new income tax surtax is expected to generate $520 million in calendar 1980.

H.B. 2879, sponsored by Rep. Fred J. Schraeder (D., Peoria), would cap collections of the new income tax surtax. It would limit growth in this tax revenue to 8 percent a year and provide tax credits when collections exceed the cap. Schraeder's bill would have little effect if approved, however, since the growth in revenue is expected to be about 8 percent annually. Collections for the first quarter of fiscal 1980 ran higher than expected, but it's still too early to tell how much more the new tax will generate than the old. Capping collections will become an issue if the Illinois State Chamber of Commerce introduces its own bill, presumably involving a much lower cap than Schraeder's 8 percent. Schraeder's bill is a new measure awaiting assignment by the House Rules Committee.

26/April 1980/Illinois Issues