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Is Illinois Serious About Tackling Debt?

The quick answer is “No.”

The answer really is not at all complex. The latest legislative session for the general assembly ended last week. The session started in November with an increase in personal and corporate income taxes. The rationale coming from the Democrats (I can be partisan because it was a partisan vote) was that the increased revenue was needed to combat the existing deficits and pay our state’s bills. Let us concede this argument for a moment and forget that higher taxes discourage individuals and businesses from living in our already shrinking state. Well…I can forget, but apparently businesses could not. Since November we have had story after story of special tax breaks given to companies so they would not move out of Illinois. Not only does this favor big business over small business, it undermines the tax increase that was deemed so necessary to balance the budget. The point of big business benefiting over small business cannot be overstated. Big businesses already enjoy the advantages of market share and sheer size over the “mom and pop” store. Common sense would tell you that when you put a more stringent set of rules on the little guy than the established business, the little guy has no chance. Take a look around. Do you see big box and chain stores in Illinois, or do you see “mom and pop” businesses. Ask yourself what you say 5 years ago. Ten years ago. Is it getting better or worse? Now let us go back to the premise of forgetting about how increases in tax rates drive down the number of tax payers. Did the Democrats ever claim that the tax increase would put us into a surplus? No. they did not. They only promised that this was a “temporary” measure that would run its course in a few years.

On the other side of the coin is spending. Did the Illinois General Assembly really do anything to reduce our bills? No. There was talk of pension reform, but nothing has changed. There were some reductions made in social services, but the reductions were political. They were used and will be used again as a cause-celeb for future tax increase proposals and program expansions. Then at the end of session, the General Assembly voted to increase spending by $434 million dollars. Does that sound like a group that has learned its lesson? No. It sounds like a group that is going shopping because daddy gave them a new credit card.

Maybe the general assembly was at least a little cognizant of that fact. That would explain the bipartisan support to open up gambling in Illinois. Proponents from both sides cited the tax revenue for their support. I could reject the soundness of casino gambling as a state revenue source on strictly moral grounds, but I will leave that to others. I will argue that it is just bad economics. Gambling is similar to the drug legalization issue. Yes; tax revenue will be generated from the legalization of casino gambling, but it is dependent completely on consumption. Money spent on gambling is money not spent on food, clothing, or anything else that could be deemed as “essential” to the household. Gambling does not provide a product or service that creates wealth, savings, or efficiencies to grow the economy. Gambling contributes to the pockets of a few at the expense of others. Taxes are a form of behavior modification. This is why most people don’t object to “sin” taxes. We feel it is ok to tax alcohol, tobacco, gambling, drugs, and prostitution because if the taxation drives people away from this behavior and the state can make income from these people who are doing “bad” things. In reality, there is no difference in a parking ticket and paying the tax for gambling. You only pay the tax if you commit the act. Are punitive measures the way to fund a state budget? During budgeting one looks for ways to cut costs and increase revenue. To increase revenue, one must either add revenue streams or enhance the ones already existing. To enhance the revenue stream from gambling, the state would need to promote gambling further. Even with a moderate or libertarian philosophy of leaving gambling as a personal choice, do we want to consider people making what most of us would concede is a poor decision to be one of the bedrocks of balancing our budget?  Should we count on people being stupid with their money to fund the government? Of course not. I don’t believe that our Illinois General Assembly is that dim either. The gambling bill never was about tackling the state’s debts. It is about clout. Clout seems to be the only thing that the state is serious about.