Even before Governor Quinn signs into law the Illinois legislature’s tax bill, the debate continues: is this the best course of action to close a budget gap? Many say that instead of trying to generate more revenue from already frustrated taxpayers, the state must make a concerted effort to instill measures for responsible pension reform (i.e. not passing the burden onto cash-strapped municipalities) and further cut spending and services. By raising both the personal and corporate income tax Illinois has made the grave assumption that the current sources of revenue will stay at, or exceed current levels.
Of course, the headlines tout the increase in the personal income tax from 3% to 5%, or some 67% overall. This is a significant change but also at issue is the corporate tax rate. Once 4.8% plus a 2.5% replacement tax (a tax collected by the state and paid to local governments in lieu of local property taxes) that levy will rise to 9.5%– including the aforementioned replacement tax. Even though, the bill contains provisions that factor out these supplemental taxes over time, the contention here is about the future of the state. How can Illinois fiscally sustain itself in an environment that is hostile to everyone’s bottom-line?
Coincidentally, times have changed and people, not to mention corporations, are willing to make a move and spare their bank accounts an undue burden. We live in a time where money is more powerful than loyalty. The doomsday scenario posits that masses of Illinois residents will pick up their belongings and head to neighboring states or toward the Sunbelt where warm weather is amble but unemployment is just as bleak. Whether this becomes a reality is for time to tell, but the state must now actively work for its money especially in regards to business.