Just A Rant On The Massive State Tax Hikes

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With our growth rate projected to sink into the negative, our state government is going to throw us a tax anchor.

When the going gets tough, government makes it even tougher.

Everyone has read about this by now.  Gotta love the way Quinn sells the tax cut for a family of four making $57,000/year or less as why it’ll be a good thing to tax us all to oblivion.  And all those courageous spending cuts on state employees.  They will not quite be halfway there to experiencing the costs of living like a non public sector worker.  Welcome to the club; get ready to make do with less because the state wants to make do with more…

I was wrong on the sneaking in the 25% gas tax hike. They put in a $20 jump in vehicle license sticker fees instead. If you drive a car that gets 20 MPG 10,000 miles a year it works out about the same. There’s 7.1 million passenger vehicles registered in IL, so that fee hike will generate $142 million. If it’s on all vehicles add another $66 million.

With the hikes in corporate tax rates, Quinn puts Illinois on the precipice of some bizarre version of self immolation.  The C-corp tax rate went up 30%, from 4.8% to 7.2%. But that tax rate does not include the 2.5% replacement tax, making our effective state rate 9.7%, and making the total tax burden for corporations in Illinois among the highest in the world. Let me restate that so there is no mistake: the C-Corp tax hikes proposed will make Illinois  one of the most expensive places for business on the entire planet.  Here’s to hoping every other state increases their corporate tax rates 30% also.

If I was, say South Dakota or Nevada or Wyoming, I’d be making it a point to let every mid west corporation know I didn’t have any state corporate taxes.  Utah, with a 5% rate, is rated as a highly favorable business location with no pay to play problems, an no goofy history of governors that go to jail.  With our growth rate projected to sink into the negative, our state government is going to throw us an anchor.  Thanks.  those western state life preservers look somehow attractive in contrast.

The C-Corp tax rate hike will make it all the harder for DG to attract new businesses.  Every city and village will be willing to give away more to try and attract businesses and jobs and the money injection that comes with them.  We already put together rebates and credits and pay as you go programs, and really tweak offers to the max.  With the tax hikes, corporation will be looking to the communities they locate in for more to soften the burden.  More utility credits, more deferred payments, rebates, think of a way and they will too.

From 2009 State Business Tax Climate Index (Sixth Edition):

  1. Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.
  2. States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.

If Illinois pols stamp their righteous feet about good schools, affordable medical care, decent roads, funded pension needs they’d better start thinking about how to attract new businesses for their investment capital and for the jobs they bring with them, not about how much more to soak the ones that are already here.  It doesn’t work that way, it never has, and it never will.

That family of four that won’t get their taxes raised because they make less than $57,000/year? What about that retired couple that together thinks they might have $60,000 for their golden years? Or that young couple both working full time struggling with the hard times that makes $60K/year?  Quinn says to you: Gimme another $100/year in state income taxes. Every year state state lawmakers, D and R, create the higher spending demands they present to taxpayers as inevitable. Raising taxes in an economic downturn is not the right way to meet those created demands.

il-fy-10-2Well here’s part of the problem; the last several years of reckless spending on entitlements and benefits we couldn’t afford when they started, and can’t afford now.  Quinn says we’d have to get rid of 34,000 teachers right out of the box.  Nice.  Pander to every parent fear first.  Never mind over 24,000 of those are from the Chicago Public Schools that are paid for by the state (FY07 state aid was $5,334 per student) because Chicago refuses to pony up their own revenues.  We pay for ours, and we pay for Chicago’s too.

Quinn threatened to get rid of 200 state police troopers.  Okay, since 2003 the state has hired 417 new officers, 87 of them just last year when the budget was already in crisis.  So now they’re a bargaining chip to scare taxpayers?  Fine, fold the entire State Police Administrative Department Logistics Bureau into any other state agency.  In fact fold every Logistics Bureau at every state agency into one single unit to administers the state’s fleet of vehicles; the purchase, storage and distribution of supplies and uniforms; the management of land acquisition, new building construction, leased facilities, and repair and maintenance of laboratory facilities, training academy, and other facilities.  Call it the State Quartermaster.

And while we’re at it:

Illinois has over 7,000 state government agencies. Can you name at least 500 of them? Do you realize every one of them has a Director or Supervisor. Most of them have Deputy Directors, Assistant Directors, Human Resource Directors, whose job has nothing to do with the task of the agency, their high paid jobs are only to be the bosses for that agency. Companies combine resources to gain efficiencies. The state should be doing this on a massive scale. One $100,000 job from each of the largest 1,000 agencies would save the state $100 million. Cut 2 from the 5,000 biggest agencies-not actual workers, just administrators who push paper and take meetings- and the state saves $1 billion a year just on salaries, not to mention perks.

Here’s another. Every state university has it’s own separate Board of Trustees. Every single one of them wastes millions each year. Make those boards a combined house and senate committee, and make the state senators and representatives do a job that amounts to no work, no time. In the process, the state will save millions just by not having to pay the perks any more.

No one will dispute we need a stable source of revenue to support necessary public needs, but taxing the bejesus out of everything and everybody so as to stifle investment and job creation, and the ability of middle class people to keep their necks above a rising tide, is not the way to get there.

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7 Responses to “Just A Rant On The Massive State Tax Hikes”

  1. Red Fred Says:

    You nail it when you say towns will have to give away more of their revenues to get and keep businesses. So the local governments get poorer while the state gets richer. Classic way to centralize power, bankrupt the small units so they are dependent on the big units.

  2. markthoman Says:

    Smells to me like a revenue transfer that goes like this:
    1) The state taxes more,
    2) The companies refuse to pay it, saying they will move,
    3) The municipalities make good on the extra state taxes by giving back money on other things-sales tax, reduced fees, utilities, whatever, just to keep the jobs, the booked hotel rooms, the employee spending.

    The company pays the same to be here; the state makes more (“fixing” their lack of revenue problem) and the municipalities make less (making it our “retaining business” problem).

    The public employee unions, teacher unions, and the AFL-CIO will fight any change in pay, benefits, or unpaid furloughs.

    “He’s taking money out of our pocket,” said John Cameron of the American Federation of State, County and Municipal Employees union, which represents prison guards, public health workers and other state government employees.

    “We’ve given them notice we’re not going to take this without a fight,” said Michael Carrigan, president of the AFL-CIO.

    On March 18th the teacher union came out against the budget changes that effect them, criticizing the cuts for going too far on state and public employees.

    The pension and benefit cuts Quinn has proposed only effect future public employees, and he has already fired back at business and republican responses critical of his not cutting enough.

    “Saying ‘no’ is not enough unless you are willing to speak the truth and offer real alternatives,” Quinn said, in response to republican criticisms.

    Her’s a last one for now. You leave a state agency public service job to take a job in the private sector, goodbye for good. Illinois has a revolving door where public employees move to companies that they regulate, and then back into the agency that regulated the company who provided the cushy job. Once you leave non- elected public service you’re done.

    I cross posted this at DGreport, but it is being held for moderation.

  3. Mark Garrity Says:

    I’d think you’d be happy that the unions are upset about Quinn’s plan.

    Check out this video from Chicago Tonight. The Center for Tax and Budget Accountability’s Ralph Martire, and the Heartland Institute’s Dan Miller discuss Illinois’s pension plan. We rank 49 out of the 50 states in public employees per capita. And the average pension for those employees is $28,000 and that doesn’t even include dollar for dollar offsets they lose for spousal or previous job Social Security
    benefits. When Carol Marin says Miller ought to be happy Quinn calls for new employees starting with fewer benes and lower pay he concedes “it’s such a tiny little thing” he and Repubs can’t bring themselves to say they even support that lest they be drawn into a progressive graduated tax.

    http://tinyurl.com/dxyl7s

  4. markthoman Says:

    Note to all 5 state pension fund members from your highly efficient state government:

    Hi. We screwed up with that promise of 8.5% returns forever. And see, we spent most all your money, and what’s left, ummm, well it had a negative return last year. Doesn’t look so hot this year either. We’re gonna raise taxes and fees, but that’s gonna cause business to stagnate and make things worse. We might issue some pension bonds and make it an even bigger problem 10 years from now, but we’ll be gone by then, so it looks like a winner to us.

  5. Mark Garrity Says:

    Well actually for decades both parties led by mostly Republican governors used the pension funds as credit cards to paper over chunks of annual state budget deficits. You can complain about Democrats wanting to “tax and spend” Mark but at least a progressive income tax is a serious effort to try to dig our state out of this hole. At some point we have to start paying our bills and meeting our obligations instead of pretending we can “borrow and spend” our way to prosperity. That way lies California’s disaster.

    Anybody who doesn’t like it can always move to Utah I guess.

  6. markthoman Says:

    I crossed out what I never said.

    “Every year state state (sic) lawmakers, D and R, create the higher spending demands they present to taxpayers as inevitable.”, is my only reference, in this post and thread, to party.


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