Proposal would send more state income tax dollars back to cities like Rockford

By Kevin Haas
Rock River Current
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ROCKFORD — A new proposal in Springfield would send more state income tax money back to cities and villages, something Mayor Tom McNamara and other municipal leaders have pressed lawmakers to do for years.

House Bill 1116 would increase the designated share of income taxes that municipalities receive back to 10% over a period of five years. That’s the rate cities long received until the state cut the rate back to 6% in 2011, costing the city of Rockford roughly $10 million a year, according to McNamara.

“Since 2011, we have lost more than $123 million as a municipality,” he said. “What I would say is the state has actually stolen those dollars and kept those dollars away from local governments.”

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The bill is co-sponsored by state Rep. Joe Sosnowski, a Rockford Republican.

“Initially it was intended to be very short term,” Sosnowski said of the rate cut. “These are all dollars that were meant to transfer to the municipalities at the local level for them to be able to take care of local resident services. It’s very important we make them whole.”

The state enacted its income tax in 1969 under Gov. Richard Ogilvie. As part of a deal to get city leaders to support the measure, a revenue sharing agreement was approved that sent 10% of the taxes back to cities. The rate has fluctuated slightly since its original cut in 2011, and it stands at 6.16% this year and 6.845% for corporate income taxes.

Gov. JB Pritzker has previously noted that cities received new forms of revenue after the cut, such as money from cannabis sales and video gambling. But McNamara, a fellow Democrat, says that money can’t match what would come from income taxes. Also, cities are permitted to use the income tax revenue for a wider range of municipal causes than the newer revenue streams.

“We can use that to patch a pothole, put a new streetlight up, hire a new police officer,” McNamara said. “We can have wide-ranging uses for those dollars.”

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McNamara is among many municipal leaders calling for the passage of the bill, which will be debated during the state’s upcoming budget discussions. Chicago Mayor-elect Brandon Johnson also called for the rate increase in his first speech to state lawmakers, and it’s the top legislative priority for the Illinois Municipal League, a coalition that advocates for the state’s cities, towns and villages.

The proposal calls for the rate to increase to 8% next year and 10% by 2027, McNamara said.

“I think it’s a thoughtful way that both the state and city can become accustomed over a period of time to that new rate change,” McNamara said. “It really is critical to communities all across the state.”

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas