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John Cullerton on Tax Hike: Come On Baby, It’s Not So Bad

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It's even worse.

The debate over Illinois’ 67% increase of the personal income tax and 46% business tax increase, in certain mediums, has taken an interesting turn.  On Wednesday Wisconsin’s Governor Scott Walker, suggested that Wisconsin’s old slogan “Escape to Wisconsin” could now apply to Illinois businesses.  In response, Illinois Senate President John Cullerton came back with a fairly pithy response:

In a statement, Cullerton thanked Walker for pointing out that even with the tax hike, the vast majority of Illinois residents pay lower personal income tax rates, and that Illinois businesses pay lower corporate income tax rates.

“Between our investments in infrastructure, our recent moves to stabilize our budget and now Governor Walker leading the marketing effort, we hope to see a lot of interest in Illinois from businesses,” said Cullerton. “I’d like to thank Wisconsin’s governor for helping spread the word.”

In the release, Cullerton goes on to point out Wisconsin has its own budget deficit and insinuates that Wisconsin may have to raise taxes in the coming years.

The Huffington Post piled on, pointing out that all of Illinois’ more Republican neighbors had higher personal income taxes at the median income, save for Indiana.

Reading this got me wondering, if Illinois is so great, why does it rank 48th in job creation?  Doesn’t pass the sniff test.

The reason why is that claims of Illinois having low taxes are nonsense.  So at the median income Wisconsin has a 6.5% personal income tax, as compared to Illinois’ 5%.  Yet, somehow, Illinois has a higher per capita tax burden ($4,346 vs. $4,194).  Some of this is that incomes are slightly higher in Illinois (as is cost of living), but a lot comes from other revenue sources Illinois has at state and local levels.

For example, Illinois has the 8th highest combined state and local sales tax rate.  The state sales tax rate in Illinois is 6.25%, vs. 5% in Wisconsin.  On top of that, the average local sales tax in Illinois is 1.97%, or 469% of the same in Wisconsin (0.46%).  Illinois’ median property tax burden is 16.9% higher than Wisconsin’s.

On top of this, even with the huge tax increases, Illinois still has a gigantic deficit.  This year Illinois managed to run a $15 billion deficit (total general fund spending was $33 billion, so nearly a 50% deficit).  Before we take into account that Illinois’ spending is going to increase at least $3.5 billion next year the Democrats estimate that the new taxes are going to generate $7 billion in revenues.  So if we’re going to pretend as if the tax base is going to be the same size in future years (it will in fact be much smaller, as Illinois was 48th in net migration before the tax increase) the deficit is going to still be $8 billion this year and over $11 billion the year after that.  That means the deficit is going to be right back where it is right around the same time these tax hikes are supposed to sunset.

That means even though we on average already pay 3.5% more in taxes than our neighbors to the north (not to mention 24% more than our neighbors to the east and west and 34% more than our neighbors to the south) these tax hikes are not only going to be permanent, they’re just the tip of the iceberg.  And that doesn’t even start to take into account the fact that the municipalities, even with their high taxes, are up to their eyeballs in debt.

In short, the only upside is that within a few years it’ll be so hard to keep the lights on that jobs leaving for Indiana and Kentucky will probably be the least of our concerns.

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Written by updowndownup

January 15, 2011 at 9:02 am

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