Swimming in Debt, Illinois Considers Massive Tax Boost

By Deanna Bellandi | January 11, 2011 | 4:25 PM EST

Springfield, Ill. (AP) - A major Illinois tax increase has jumped its first legislative hurdle, setting the stage for a vote by the entire Illinois House.

The tax plan was approved 7-5 Tuesday by the House Revenue Committee.

It would temporarily bump the state's personal income tax rate to 5 percent, up from 3 percent now. That's a slightly smaller increase than Democratic leaders originally proposed.

Legislative leaders agreed to impose strict caps on spending. If spending grows more than 2 percent a year, the income tax increase would immediately be canceled, officials said.

The tax package could generate about $7 billion a year, enough to balance the annual budget and begin chipping away at a backlog of unpaid bills.