ILLINOIS (IRN) — Cut the highest state and local taxes in the country or remove the federal SALT deduction cap, that’s the debate between Illinois’ Democratic congressional delegation and their Republican colleagues siding with Gov. Bruce Rauner.
The SALT deductions were capped at $10,000 in the tax reform bill congress passed in late 2017. The Republican-controlled U.S. House passed a measure last month to the Senate that would make that cap, along with the individual federal income tax cuts, permanent.
U.S. Rep. Rodney Davis, R-Taylorville, sponsored the House bill. He said only about a third of his district actually took the SALT deduction when it was offered.
The nonpartisan Tax Foundation reports the average Illinois family keeps $2,300 because of the federal tax cuts. But Illinois also has among the highest state and local tax burden in the country.
Last week, U.S. Rep. Bill Foster, D-Naperville, asked Gov. Bruce Rauner to encourage congressional Republicans to stop supporting the cap.
“The newest tax scam hurts families in Illinois by making the cap on state and local tax deductions for individuals permanent,” Foster said in a statement. “I call on Gov. Rauner to address the damage the new tax law will have on Illinois taxpayers.”
Foster’s letter was signed by Illinois Democratic U.S. Reps. Bobby Bush, Robin Kelly, Luis Gutierrez, Mike Quigley, Danny Davis, Raja Krishnamoorthi, Jan Schakowsky, Bradley Schneider and Cheri Bustos.
“Illinois taxpayers already pay significantly more than the national per capita average in federal taxes even though our state receives far less than the national per capita average in federal spending,” the letter said. “Capping the SALT deduction exacerbates this problem.”
The letter said other states are looking to offer deductions against property and income taxes based on contributions to nonprofit organizations. It’s still unclear if such a move is allowed by the IRS. A stalled bill from the Illinois legislature would have allowed donations to a state fund in exchange for a tax write-off.
Republican U.S. Reps John Shimkus and Adam Kinzinger said the real answer is to lower the state’s taxes.
“That’s the answer,” said Shimkus, R-Collinsville. “The onus should be on the state of Illinois not on the federal government.”
“Look, this state has been mismanaged for a very long time and the current governor has done his best to pull us out but it’s a deep hole,” said Kinzinger, R-Channahon, “and when you have among the highest property tax rates in the free world, in the United States of America, obviously something is wrong with how Springfield is being managed and that’s something that needs to be handled.”
In a response to Foster’s letter, Rauner’s office said Foster needs to get the Democrat majority in the Illinois legislature to lower property and income taxes.
“As Gov. Rauner shared with those lawmakers in April, we are working to find solutions to the financial challenges and tax burden crippling Illinois,” Rauner spokeswoman Elizabeth Tomev said. “We are actively working to reduce income and property taxes in Illinois. We encourage the members of Congress to get their Democrat colleagues in the Illinois General Assembly on board so together we can work for real bipartisan reform to reduce taxes.”
The state’s leading business groups agree with the governor.
Illinois Chamber of Commerce CEO Todd Maisch said the cap wouldn’t be an issue if Illinois taxes weren’t so high.
“If you reduce taxes at the state and local level the it doesn’t matter, you don’t lose anything,” Maisch said.
National Federation of Independent Business Illinois State Director Mark Grant agreed, but said he’s not sure there’s much will at the statehouse for that.
“It’d be great if those could be cut but that doesn’t seem to be the environment or what’s coming our way,” Grant said.
Grant said small businesses are enjoying the federal tax cuts and the doubling of various deductions.