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The Breakdown: How tax plan would affect families
Watch ABC7's exclusive one-on-one interview with Gov. Quinn.
"To be direct and honest: our state is facing its greatest crisis of modern times," Quinn told lawmakers in formally presenting his budget Wednesday.
He tried to soften the blow by expanding a tax break that mostly benefits the poor and middle class, arguing millions of families would end up paying less under his proposal. Quinn also wants a sales tax "holiday" to help parents pay for back-to-school supplies.
The governor told ABC7 on Wednesday afternoon that he would stand for re-election in 2010. His made that statement during a private interview ABC7 had with the governor after he delivered his budget message.
With barely seven weeks in an office to which he was not elected, Pat Quinn was called 'His Excellency the Governor' as he was introduced to sustained applause by his fellow Democrats. A few minutes later, things got serious.
The assembled senators and House members already knew about the plan that would raise the income tax from 3 percent to 4.5 percent. But because of increased exemption it would affect only the wealthiest half of Illinois taxpayers. Hearing the governor say it on Wednesday afternoon left the Republicans no more impressed.
"A tax increase like he is proposing is going to cost Illinoisans their jobs," said State Sen. Matt Murphy, (R) Palatine.
Democrats interrupted several times with applause during the speech. House Speaker Mike Madigan would not take questions from reporters. The Senate president, John Cullerton, said while an income tax increase and other fee increases are likely in the balancing budget act, the overall plan needs review.
"I think with an $11.5 billion deficit, it's very likely there will be an income tax increase. The question is what the structure will be," said State Sen. John Cullerton, (D) Senate president.
The governor made his first formal announcement that he will run in 2010.
"If I keep doing a good job I will run next year for re-election," Quinn told ABC7.
He delivered a quick kiss to Lisa Madigan, a possible gubernatorial opponent next year.
"I really like Lisa Madigan. I like her dad. They're fun to work with. They care about public service and I do too and I think if we work together as partners we can accomplish great things for our state," said Quinn.
Lisa Madigan has already made published statements that she opposes the governor's tax plan. The governor told ABC7 he is not concerned about running for re-election, having proposed an income tax increase. He said it's not entirely an increase, only half an increase and he insists the lower half of wage earners in Illinois will actually get a tax reduction.
Quinn's Budget Proposal
Quinn asked lawmakers to support a $26 billion construction program that would build new roads, bridges and schools around the state, supporting some 340,000 jobs. Paying for the massive initiative would mean raising the fees for driver's licenses, license plates and title transfers.
Quinn also wants smokers to pay more. He proposed increasing the tax on cigarettes, now 98 cents a pack, by an additional $1 over two years.
The governor knew he was asking a lot of lawmakers heading into an election year, telling those who offered a warm welcome as he took the podium: "I hope you're applauding at the end of this speech."
Quinn also clearly hoped to remind lawmakers -- and voters -- of the good will he has built up before and since his predecessor, Gov. Rod Blagojevich, was kicked out of office over corruption allegations.
"As we prepare for a better future, we must also make tough choices about cleaning up government right now," Quinn said during his Wednesday address. "Ethics reform is of paramount importance to me and the people of Illinois."
Quinn's budget plan is bound to trigger a battle with AFSCME, the influential union that represents state employees. He wants state employees to pay more for health care, take four unpaid furlough days and accept reduced retirement benefits in the future.
With an $11.5 billion deficit to erase, Quinn's budget contains few bright spots.
There's no money to reopen historic sites closed by his predecessor. Mental health grants would drop by $12 million. Spending on senior citizens and disabled people will be held flat.
"This gap is too large to be addressed with any single measure whether it is spending cuts, revenue increases or federal recovery money," Quinn said in a letter to lawmakers.
Quinn inherited the budget mess following Blagojevich's ouster in January. He was suddenly scrambling to respond to a budget deficit that, driven by plunging tax revenues and increasing demand for services, seemed to be growing by the week -- from an estimated $7 billion to $9 billion to $11.5 billion.
His budget proposal showed signs of the rush. The official letter accompanying it talks about a construction program of just $26 -- leaving out the all-important word "billion."
The Chicago Democrat portrayed his budget as an alternative to Blagojevich's "show-biz" approach.
But his budget proposal depends on cutting some corners.
It would lower this year's contributions to pension systems by nearly $2.9 billion on the assumption that Illinois will save billions of dollars in coming decades by cutting retirement benefits for new state employees.
He also calls for dipping into special-purpose funds to pay for general expenses, keeping tax money that would otherwise go to local government and diverting money from the state road fund to help support the construction program.
That long-awaited construction plan also would be funded by raising the cost of license plates by $20, to $99, and doubling the $10 fee for a driver's license. Mass transit construction would get a boost from an increase in the vehicle transfer fee.
By one of the many ways to measure the state budget, Quinn's proposal would push spending to $52.9 billion in the fiscal year beginning July 1. That's up $2.1 billion, or about 4.1 percent.
Much of the increase comes from federal stimulus money the state will receive for education and Medicaid.
The governor has a tough sales job ahead of him. Many lawmakers are open to tax increases but only if they can show constituents how they will benefit.
Quinn is trying to demonstrate benefits by focusing on the increased exemption -- the amount of a family's income that is exempt from taxes. By tripling it to $6,000 per person, Quinn argues many families would benefit from his plan.
Any family of four making less than $60,900 a year would end up with a smaller tax bill, he says. But other taxpayers face a different picture. A single person making $60,900 would pay $630 more. A two-person household -- say, a single mother and her child -- would pay $420 more.
Republicans are generally opposed to an income-tax increase or a hike in the corporate tax.
Revenue from higher taxes will fall short of projections because people will change habits to shield income, said Rep. Mark Beaubien, R-Barrington Hills. Taxing businesses in this economy, he said, would be devastating.
"People won't expand their businesses, they'll leave the state," Beaubien said.
Quinn proposes raising the corporate income tax rate to 7.2 percent, generating $350 million. He also wants to end about $100 million in corporate tax breaks, a proposal that has often been rejected in the past.
"There's something wrong when our state gives more tax breaks to those who raise thoroughbred horses than it gives to parents raising children," Quinn said during his budget address.
A sales tax holiday would ease the burden on families. Quinn wants to lift the 5 percent sales tax for 10 days in August on certain school-related items. That would cost as much as $50 million, an amount made up by letting retailers keep less of their service fee for collecting the tax.
The administration estimates its income tax increase would bring the state an additional $2.8 billion.
Reaction from the Chicago area
With April 15th a month away, Josh and Colleen Diller arrived at their tax appointment on Wednesday night.
"It's definitely pretty nerve-wracking this year and I can imagine what it will be like next year," said Collen Diller.
This year, the husband and wife settled into their appointment, expecting to pay. Next year, they're certain they will if Gov. Quinn's proposed income tax increase is approved.
"I think before we raise taxes in this state, we should get a little bit of control on spending. I think this state is out of control," said Josh Diller, attorney.
And everyday workers, who shuffled home on Wednesday night, shared that frustration.
"It's a terrible solution. It's really going to hurt. I'm totally against it," said Ana Chirinos, investment firm worker.
"We're already struggling, we're in a recession as it is, so things are already tight. More money out of our pocket, when are we going to bounce back?" said Darius Williams, payroll manager.
The state must bounce back from a $11.5 billion dollar deficit. And some workers are willing to pay.
"It works out to about $50 a month for me and my husband. So I don't like it, but, like I said, I don't think there's another alternative," said Amanda Clothier, business manager.
"If it's necessary, it's necessary," said Wally Ghuneim, law firm clerk. "I am willing to pay."
But how much?
The union that represents some state and university workers says they're facing a double whammy: income tax increases, along with higher pension, and health care costs..
"They are asking for too big of sacrifice from state employees, people who have already had to sacrifice, who have been doing more with less," said Henry Bayer, AFSCME Council 31.
AFSCME, the American Federation of State, County and Municipal Employees, plans to fight the governor's proposal and fight it aggressively.
Afscme is just one group that will be lobbying. There will be much of that in Springfield in the upcoming weeks.
The Associated Press contributed to this report.