Free Markets, Free People

Daily Archives: January 13, 2011

Illinois–dear tax payer we wasted all your money, now pay up!

Just phenomenal.  The state of Illinois – which spent itself into fiscal oblivion – has decided the way to make up the huge shortfall they’ve run up is to increase taxes for state taxpayers by 66%:

Democrats in the Illinois Legislature on Wednesday approved a 66 percent income-tax increase in a desperate and politically risky effort to end the state’s crippling budget crisis.

The increase now goes to Democratic Gov. Pat Quinn, who supports the plan to temporarily raise the personal tax rate to 5 percent, a two-thirds increase from the current 3 percent rate. Corporate taxes also would climb as part of the effort to close a budget hole that could hit $15 billion this year.

Wonderful.  If I lived there, I’d certainly be considering a new state – border states must be happy as they can be over this.  And, of course, same with corporations.  But as grim as that is, here’s the laugh line:

It will be coupled with strict 2 percent limits on spending growth. If officials violate those limits, the tax increase will automatically be canceled. The plan’s supporters warned that rising pension and health care costs probably will eat up all the spending allowed by the caps, forcing cuts in other areas of government.

Question: why, in an era of little to no inflation is there any spending growth when you have a budget shortfall like that in IL?  The state shouldn’t be increasing spending  by even a single penny, for heaven sake.

In fact, it would make much more sense to keep it flat or, better yet, have it actual cuts (not “cut” in the sense politicians usually use the word) in spending by 2%?  Pensions?  Cut ‘em.  Health care costs?  Cut ‘em? Government employees?  Let ‘em go or furlough them.  You politicians got the state in the mess it’s in, now live with the consequences and face the music.

The state got itself in this mess by over promising and over committing.  Now the state should work itself out of the mess without again tapping taxpayers.  Instead, it chooses to take more money from its citizens to pay for its profligacy.   It penalizes them for something the state’s politicians willingly, irresponsibly and thoughtlessly did. 

And I’m sure the jobs picture is wonderful in IL.  It must be if the state can afford to throw some higher taxation at corporations there.

Because, you see, saying “no” to government employee unions and the like is much harder than slapping higher taxes on the masses and business.

However, all things considered, most should know that if you want to live in a blue state, these sorts of things are what you’re most likely going to have to suffer. 

The increase means an Illinois resident who now owes $1,000 in state income taxes will pay $1,666 at the new rate. After four years, the rate drops to 4 percent and that same taxpayer will then owe $1,333.

Any bets that before the 4 years are up the new rate becomes permanent?

"Based on this particular legislation the only businesses that will benefit are the moving companies that will be helping many of my members move out of this particular state," said Gregory Baise, head of the Illinois Manufacturers’ Association.

"This is the nuclear bomb of jobs bills," said Sen. Dan Duffy, R-Lake Barrington.

Timing is everything, isn’t it?  So much for hiring that new employee on the margin.  He or she now has been replaced – before they were ever hired – with new taxes.

The usual Democrat answer?

Democrats countered that even with the increase, Illinois’ tax rate will be lower than in many neighboring states — Iowa’s top rate is 8.98 percent, Wisconsin’s is 7.75 percent. They also maintain that without more money, state government may not be able to pay employees by the end of the year. Major government services might have to be halted, they warn, and groups waiting for state payments will go under.

That’s right – scare tactics and the usual “our taxes still aren’t as high as others”.  Well here’s a clue IL Dems – nothing says they have to move to “neighboring states” does it?

~McQ

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Two credit rating services warn US about possible downgrade in rating – again

While all the angst and hang-wringing continue over the Giffords shooting and the false flag of “vitriolic rhetoric”, Moody’s and Standard & Poor’s Corp have again warned the US it’s credit rating is in jeopardy:

Moody’s Investors Service said in a report that the U.S. will need to reverse an upward trajectory in the debt ratios to support its triple-A rating.

"We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase," said Sarah Carlson, senior analyst at Moody’s.

Standard & Poor’s Corp. also didn’t rule out changing the outlook for its U.S. sovereign-debt rating because of the recent deterioration of the country’s fiscal situation. The U.S. has a triple-A rating with a stable outlook at both raters.

"The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits, Carol Sirou, head of S&P France, said at a conference in Paris on Thursday. "But that may change. We can’t rule out changing the outlook" on the U.S. sovereign debt rating in the future, she warned. She added the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy. "No triple-A rating is forever," she said.

Note the line I emphasized.  That is the primary reason it hasn’t happened yet.   The dollar is the true benchmark currency of the world.  Or perhaps a better way of saying that is it is the benchmark currency of the world at least for the time being.  But busting through 14 trillion dollar debt ceilings and continuing uncontrolled spending is a very quick way to have other countries consider other currencies or perhaps a market basket of currencies to replace the dollar.

If that happens, our triple-A rating will disappear faster than a pizza at a Weight Watchers convention.  But even if it doesn’t, we’re well on the way to a downgrade anyway:

The most recent official figures show the ratio of federal debt to revenue averaging 397% of gross domestic product in the period to 2020, while the ratio of interest to revenue will rise to 17.6% by 2020, from 8.6% in the last fiscal year. "These figures are "quite high for an Aaa-rated country," Moody’s said.

Debt affordability is "very important to the rating process," Ms. Carlson said. U.S. general government debt affordability, including states and municipalities, is "rising over time to a high level for an Aaa-rated country," the report said.

Or said more succinctly, the only thing keeping us at the Aaa level is the fact that we are the home of the dollar.   Otherwise the ratios above would most likely have seen us downgraded already.

Comforting, no?

~McQ

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Palin, "blood libel", Krauthammer and the left–have we “completely lost our minds?”

What a mess. Watching the political world in the light of the Tucson tragedy has been disheartening and disgusting.

While the President’s speech last night was fine, the venue was awful. And T-shirts? Really? It wasn’t a pep rally, but it seemed like one (I’m primarily talking about crowd reaction). What a more somber Oval Office speech wasn’t proper enough?

And this Sarah Palin thing. Am I ever tired of Sarah Palin. That said, I’m even more tired of the left’s obsession with Sarah Palin. Now she’s in hot water in some oversensitive and uninformed quarters of the left for the use of the term “blood libel”, which apparently has been claimed as a “Jews only” term.

Nonsense. That’s like saying “holocaust” can’t be used except in reference to the horrific Nazi pogrom of WWII.  When you have fools on the left, like Jane Fonda, accusing Palin of having “blood on her hands” (talk about irony), then “blood libel” seems more than an appropriate term for the accusations.

I think Charles Krauthammer said it best (via Daily Caller):

“[T]he fact is that even the ADL, the Anti-Defamation League in expressing a mild rebuke to Palin for using this admitted itself in its statement that the term ‘blood libel’ has become part of English parlance to refer to someone falsely accused,” Krauthammer said. “Let’s step back for a second. Here we have a brilliant, intelligent, articulate, beautiful, wife, mother and congresswoman fighting for her life, in a hospital in Tucson, and we’re having a national debate over whether the term ‘blood libel’ can be used appropriately in a non-Jewish context? Have we completely lost our minds?”

Apparently some of us have.  Krauthammer also notes that given the unfounded and obvious political attacks by the left on Sarah Palin, she had every right to defend herself.  However, when she finally issued her defense, the left had already been soundly “refudiated”:

“I found her speech unobjectionable, unremarkable but unnecessary,” he said.  “Of course, anybody who is attacked as she was has the right to defend herself in public. However, it wasn’t as if others hadn’t counteracted the calumny about her and others being responsible in some way for the massacre in Tucson. By the time she had the video on her website, the debate was over. The left, which had launched the accusation, had been completely defeated, ‘refudiated’ if you like, and disgraced over this. There wasn’t a shred of evidence and the battle was over. I mean, it was a rout to make the Pickett’s Charge look like a draw.”

Palin is the left’s favorite target (there I go with that violent rhetoric again) and sometimes it’s just best – especially when it has been convincingly done – to let others fight the fight.  That said, it most likely wouldn’t matter a whole bunch.  She could just sigh loudly and someone on the left would object to her using more air than others.

I think what Krauthammer is trying to get across is if we’re serious about mourning those lost in Tucson and paying tribute to them, political attacks on others shouldn’t be occurring to begin with.

That said, the “politicization” horse left the gate long ago on this one.  In fact, almost immediately after the shooting in Tucson, some on the left were already accusing Palin of being responsible.  Then after stirring it all up, they had the temerity to accuse her of “it’s always all about Sarah”.

~McQ

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