Is Michigan's proposed 3% income tax increase on the gross (not personal) income of ONLY physicians good or crazy?

Pat Quinn and the leaders of both houses of the Illinois General Assembly have agreed on raising the state income tax. If the bill passes, the plan would raise the personal income tax rate from the current 3 percent to 5.25 percent. That’s a 75 percent increase.

In real dollars, that would mean if you currently owe $1,000 in taxes, next year you would owe $1,750. LISTEN: Newsradio 780? S Dave Dahl Reports.

The increase is for four years. After that, the personal income tax would go down to 3.75 percent. The Democratic leaders in the Illinois General Assembly believe this income tax increase, a corporate tax hike, and a $1-per-pack tax increase on cigarettes would erase the state’s $15 billion budget deficit.

The permanent portion of the increase would be used several ways. Some would be devoted to schools and some to repaying an $8.5 billion loan that would be used to pay overdue bills, state Senate President John Cullerton said. Another chunk would go to property tax relief in the form of annual $325 checks, he said.

The checks would replace the property tax exemption that homeowners can now claim on their income taxes. “I want to emphasize that it is just an outline that we’re working with, and that we’re talking to our members about,” said Cullerton spokeswoman Rikeesha Phelon. “But we’re looking at, possibly, a quarter of a percent that would possibly go for permanent property tax relief.

Cullerton said House Speaker Michael Madigan and Gov. Pat Quinn fully support the tax proposal, although Quinn once promised to veto any increase of that size. Madigan’s spokesman said he couldn’t discuss the speaker’s position.

The Senate has approved tax increases in the past, so the biggest question about this proposal is whether Madigan can find enough votes to get it through the House. The governor’s office put out a statement that stopped short of saying the three leaders had reached a final agreement. Rank-and-file legislators said Quinn described the tax plan to them earlier in the day and portrayed it as a deal among all three of the powerful Democrats.

Democrats say they have no choice but to raise taxes as one part of a solution to Illinois’ massive budget crisis. The state deficit could reach $15 billion in the coming year. The government is borrowing money to cover some obligations, letting bills go unpaid for months and cutting corners everywhere from state prisons to state parks.

The state House is expected to caucus and discuss the income tax hike later Friday, but most likely vote on it next week. The state Senate is not back in session until Monday, which is the earliest it would vote. (TM and © Copyright 2010 CBS Radio Inc.

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