Free Markets, Free People


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

  • Aw, shoot…
    I guess we have to get ready for a new influx of Yankees down here in Texas.
    There goes the neighborhood…

  • A “temporary” tax increase, is that like the temporary tax on those nefangled telyfoney things they used to fund the Spanish American war?

    • Like those temporary “business taxes” instituted during “The Great War” (back before they numbered them).

  • When I moved from Ohio to Texas I took a pay cut, and still came out ahead.

    • Jeff, we’re glad ya’ll came down.  Just be sure to vote right, y’hear…???

      • Rags, I haven’t been checking and just now saw you asked me what core goals we have in common.  I answered that post in the thread “Fools Rush In to Define Giffords Tragedy.”  I also acknowledged I was wrong and you were right about what would happen in the 2010 election.
        On thing about state spending: increasing health care costs, a bad economy (leading to more costs) and an aging population means states need to make dramatic cuts in order to maintain current services.    I think Jerry Brown is modeling how this can be done with his very draconian plan for California.  Brown is a fiscal conservative who cleaned up the fiscal mess left by his predecessor when he first became governor (Gov. Reagan — never a fiscal conservative — had left that mess).   So yes, deep cuts are coming probably everywhere.     Also very interesting is how Brown’s tax hike (associated with the cuts) is going directly to local governments.   That is the key to dealing with this crisis: decentralize power and resources to local governments, the age of the strong central bureaucratic state is ending.

  • “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.”
    Democrats are counting on voter stupidity – which seems like a safe bet – since comparing rates is as useful as comparing the number of Twinkies consumed in each state.  All the details of the tax code and the resulting bottom line are what matter.


     

  • Isn’t this just a 2% increase? The existing tax rate is already a percentage.
     

    • The rate is up 2% but the change in the rate is( 5-3/3) or 66%.   More clearly, if you currently pay $3,000 of tax on 100k income, now you will pay $5,000 in tax.  That’s 66% more you are paying than before (because the $2,000 increase is 66% of the original tax of $3,000).

       

      • Not to mention that the $2000 increase works out to an extra $167 a month.  The 100K income family is going to make up for that by cutting… what? Food budget? dance lessons? soccer games? not buying a new car? Choose your poison, any of it is going to have a dampening effect on local stores and businesses.

        • Wacky HermitThe 100K income family is going to make up for that by cutting… what? Food budget? dance lessons? soccer games? not buying a new car? Choose your poison, any of it is going to have a dampening effect on local stores and businesses.

          No, no, NO!  Rich people’s spending habits have NO effect on the economy.  None.  Nada.  Zip.  Rich people aren’t socially conscious, so all they do is hoard their money or spend it on cigars and limousines and top hats and private jets.  They don’t spend it (directly or indirectly) to put people to work and give them wages, corporate health insurance, 401k contributions, and other benefits.  That’s why the government HAS to tax them: to get some of the money that they (somehow) STOLE away from them to give it back to The People.

          / sarc

      • Damn you and your “math”…
        Hater…!!!

  • I saw that Indiana Governor Mitch Daniels is preparing for an influx of refugees from Illinois.

    • “It’s like living next door to `The Simpsons’ — you know, the dysfunctional family down the block,’ Indiana Gov. Mitch Daniels said….

    • Springfield, Springfield!
      It’s a hell of a town!

  • If I could offer a minor correction to a typo in the title:
    That should have been “we stole all your money”, not “wasted all your money”!
    Unfortunately, I am unable to leave this godforsaken state for now.
    Ah well.

  • Interesting that no mention of neighboring Indiana’s tax rate was made in the press release by Illinois Democrats; only Wisconsin and Iowa, both higher tax states than Illinois, were mentioned.

    How long before higher-tax Chicago begins to look like high-tax Detroit?

    • Detroit doesn’t look like Detroit because of taxes or fiscal policy.  You could make Detroit a tax free zone and it wouldn’t look much different than it does.

  • Wisconsin just cut their corp rates, AND instituted a measure that gave businesses that locate in WI a 2-year break.

    And it doesn’t matter that personal taxes are higher in Wisconsin – they corp rate is lower, and that’s what businesses care about.  “Escape to Wisconsin” has a whole new meaning.

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

    “I am altering our bargain.  Pray that I don’t alter it any further.”
    Darth Vader (D – Springfield)

  • Arizona has a fairly low state tax of 3.8%, but we are one of only about five states that have a Corporate Tax (over and above everything else) of 8-10%. Hence there are virtually NO major corporations headquartered here.
    Phoenix is the 5th largest city in the US, but has only two companies in the Fortune 1000 HQ’ed here (Dial Corp, and USAir – fondly known a USscare).
    Point is, the state pols can play all sorts of games with the tax laws.