Governor Pat Quinn today announced that fiscal year 2013 income tax revenues will exceed the Illinois Department of Revenue's forecast by approximately $1.3 billion. This is a one-time revenue stream, generated from businesses and individuals selling assets or receiving early dividends, bonuses or other income in anticipation of higher federal tax rates for tax year 2013. The additional revenue will be used to pay down the state's backlog of bills, a result of decades of financial mismanagement.
"While these additional dollars are good news and will aid in reducing some of what is owed, relying on a one-time fix will not help us in the long-run," Governor Quinn said. "This revenue will be used to help knock down our backlog of bills, but we must continue to focus on pension reform and restoring Illinois to full fiscal stability."
Prior to the January 2013 increase in federal tax rates, a number of businesses and individuals strategically shifted the timing of certain forms of income in order to take advantage of tax year 2012's lower federal tax rates. Some businesses paid bonuses and dividends scheduled for tax year 2013 in 2012 instead. Similarly, some businesses and individuals accelerated the sale of investments so that the resulting income would be taxed at 2012's lower rates.
The combined response created a surge in the tax payments received by the state in April, which is when payments for tax year 2012 were due. This surge in payments is a one-time event because it was in response to a federal policy change that will not occur next year.
Because this is a one-time event, fiscal year 2014 revenue forecasts will not be restated.