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Relief sparse for most taxpayers

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SPRINGFIELD — One group has been all but absent from Illinois' recent tax break debates — the state's 5.7 million middle-income households.

By Andrew Thomason

SPRINGFIELD — One group has been all but absent from Illinois' recent tax break debates — the state's 5.7 million middle-income households.

The average household in Illinois is expected to pay an extra $975 this year, after the Legislature approved, and Gov. Pat Quinn signed, raising the individual income tax rate from 3 percent to 5 percent, a 67 percent increase.

Combined with a 47 percent increase in the corporate income tax rate, the state is expecting an extra $7 billion in revenue, with average households shouldering nearly 40 percent of that amount.

But when CME Group, which operates the Chicago Mercantile Exchange and Chicago Board of Trade, and Sears Corp. threatened to close shop in Illinois and move to another state, the Legislature pursued three tax relief packages — $250 million, $325 million and $800 million — that would benefit businesses and low-income households.

In this failed rush for relief, middle-income earners were practically left in the dust.

Under all three packages, the standard tax deduction Illinoisan individual taxpayers can claim would have increased by $50 to $2,050. After factoring in the 67 percent rate hike, taxpayers would see a tax bill just $6.70 less.

Kristina Rasmussen, executive vice president of the Illinois Policy Institute, a free market think tank, said the tax increase was equal to what an average family spends on three months of groceries, while the increased tax exemption translates into just "a bag of chips and a drink."

"It's not a good deal and taxpayers deserve tax relief. This isn't it," Rasmussen said.

In 2009, 5.7 million middle-income households paid $3.2 billion under the 3-percent income tax rate, the most a single demographic paid to the state. This average household, consisting of 2.6 people, earned between $25,000 and $100,000 in 2009, according to the Illinois Department of Revenue.

Under the new rate of 5 percent, those households will kick in $5.3 billion for 2011, or $1.1 billion more than 2009, the most recent data available. That's compared with the $30 million it will cost the state in tax revenue to increase the standard deduction by $50.

"It's going to help every individual taxpayer in Illinois. For individual taxpayers, it is not a large amount, we recognize that, but at the same time it is a fairly large amount for the state to put forward," said state Rep. David Harris, R-Arlington Heights, who is working on the tax packages.

State Sen. Toi Hutchinson, D-Chicago Heights, sponsored the Illinois Senate's version of the package, which would have adjusted annually based on the national consumer price index. She said that would help middle-income households more than a static increase, but added that more reforms could come during the Legislature's spring session.

"It came to us in the flurry and the flash of what a crisis does," Hutchinson said. "This is just the start. It has to be the start because our entire (tax) code needs to be looked at."

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