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October 21, 2016

Almost lost in the battle over how to close Illinois' $8 billion budget hole is the fact that the state effectively gives away even more than that amount each year in tax breaks.

A plethora of 257 separate categories of breaks -- called tax expenditures by experts -- cost Illinois $9.4 billion in revenue in fiscal 2015 alone, according to state records.

There are specially targeted breaks for business, breaks for the wealthy, breaks for the poor, breaks for mom and pop and breaks for grandma and grandpa -- all jealously protected by deep-seated constituencies that can render any attempt at reform a minefield for political leaders. Together, they vastly complicate a tax system that in theory is simpler than most because the prime revenue generator, the income tax, imposes a flat rate of 3.75 percent for individuals and 5.25 percent for corporations.

Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, said once tax expenditures are approved, their effectiveness and fairness are rarely if ever reviewed.

Martire argues the retirement income exemption "needs to go." However, low- and moderate-income seniors should continue to be exempt, he said. The issue, he concedes, is likely a non-starter now in Springfield.

Source: Daily Herald