Illinois Pols Blow Up Their State

Hard to believe, but if you paid $2,000 in state income taxes in Illinois last year, you’ll pay nearly $3,400 this year, thanks to the politicians who passed a “temporary” 66 percent hike. Ouch. Boom.

While much is being made of the fact that other states have higher individual and corporate tax rates, the simple fact is that mismanagement, overspending and lousy oversight led to the increase. Politicians, always good at spending and always bad at managing, found themselves in a lose-lose situation (one they put themselves in, of course) of having to cut virtually every state program to the bone or jack up the people that are paying for those programs. So, pay more taxes, folks.

Politicians voted to raise the personal income tax rate from 3 percent to 5 percent and the corporate tax rate from 4.8 percent to 7 percent. Both rates were adjusted to carry through until 2015, when they would drop to 3.25 percent and 5.25 percent, respectively.

Sure . . . ever meet a “temporary” tax increase before? Me neither.

Clearly a tax increase was needed, but also as clear is the fact that the Illinois legislature had failed to address its financial quagmire before it became a financial disaster. Stop me if you’ve heard this before: underfunded pensions, growing deficits, delayed bill payments. Ok, let’s say a $13 billion deficit, some $8 billion in unpaid bills and around $78 billion in underfunded pension liabilities. Of course when all that starts hitting the fan, bond ratings fall and the state has to pay more to borrow money and pay more to service the debt they already have.

Despite the fact that states around the country are reporting higher tax collections recently (Illinois’ revenue has increased from $57 billion to $68 billion during the first six months of the fiscal year), apparently there was no choice but to blow the state up. I’m guessing there were plenty of other choices, despite cuts and layoffs already made.

What will be interesting to watch is the impact on jobs and businesses in the state . . . Some are predicting the tax increases could cost the state more than 250,000 jobs over the next few years. Part of the problem is that what business will extend itself to make new hires if there isn’t a predictable tax pattern from the state?

Government, no matter the size, local, state or federal, needs to learn to run lean. Save money when it’s pouring in so when the bad times come, they don’t have to gut people when times are tough. Unemployed people can’t pay higher taxes, and businesses can’t hire people when the economy tanks. We need long-term predicable policies.

With an unemployment rate of 9.4 percent, it hardly seems the state is interested in attracting new businesses or encouraging the ones they already have. Too bad, I heard a story once about things rising out of the ashes . . . I’m thinking Illinois has just blown up the Phoenix.