I can’t say much more about the Illinois income tax increase that hasn’t already been said. The 67 percent increase on income and the hike in the corporate rate from 4.8 percent to 7 percent not only make Illinois taxpayers angry, but they are a killer for Illinois, which lost almost half a million residents to nearby states in the last ten years due to it’s already poor handling of the economy.
Well, maybe I can say a little more…..
First, supporters say that it is only temporary. According to the bill, the 5% income tax rate will be in effect for four years before being lowered to 4%. Remember that the tax rate yesterday was 3%. The 4% rate will last until 2025 when it will be lowered to 3.5%. That is it. No mention of going back to a three percent rate…ever! We will never see an income tax rate of 3% percent again. This is a permanent tax increase. Springfield has become the mafia. Government is the only place where an increase is called a decrease. This is because they didn’t screw you as badly as they had wanted to.
I am not aware, but I did not see any type of similar plan for the corporate tax. It is now 7 percent.
These two provisions addressed the revenue side (again, made necessary by current policy that chases taxpayers and job providers away). How did the General Assembly address the spending side? What did they cut? Nothing. What they put in the bill was a cap on budget increases of 1.7% per year. Yes, you heard that right, they aren’t going to cut back spending, they are just putting a limit on how much MORE they can spend. The bill states that if they spend over the cap, then the tax rates will go back down to 2010 levels.
I’ve been throwing around percentages like it were going out of style. What does it really mean? Let me put it in terms that it is easy for all of us to get our arms around. The median family income is $60,387.00. The income tax increase just passed amounts to $1,207.74 more per household going back to the government. That is roughly $100 a month that the average Illinoisan won’t have. Even if you make more than the average, $100 less per month is tough to swallow. Then again, if you make more than the average, then you are paying more than $100 per month.
Let’s take a look at the corporate tax effects. We will use my company as an example. A year-long project at my company will generate revenues of about $3,000,000.00. The extra taxes taken from this project alone is $66,000.00. This means that to stay on budget, we will not add a project manager or an engineer to the payroll. Now let’s be more real. My company does five or six of these projects per year. That means that 5 or 6 jobs have been lost by the vote that took place at 1:20 AM in the capitol building. My company was planning to grow. Now….not so much.
I am going to go back to numbers that we can’t comprehend for a minute as I talk about spending. According to the Chicago Sun-Times, spending growth would be limited to two percent annually. Do you know what two percent of last year’s Illinois budget is? $1,132,800,000.00. Yes. You counted the zeroes correctly. That is over a billion dollars.
Let’s take another look at this. Let’s look at what the future holds. In the short-term, this tax increase will increase revenues. Citizens and corporations won’t move immediately. They just can’t from a practical standpoint. But the recent census figures have shown us that we can move eventually, and we will. It’s just a fact. History will repeat itself if these oppressive tax policies continue. Then again, not all companies will move. Some won’t have to. Since Adam Smith, business has known that the price of a product is dependent on what the market will bear. For companies that sell commodities that people just have to have, the remaining companies will just pass on their costs like they pass on any other new expense. They raise their price. So the 2.2 percent corporate tax will be borne by the consumer. That’s you and me. So in reality, our taxes didn’t just go up by two percent. They went up by 4.2 percent. If we go back to the median Illinois family that has a total income of $60,387.00 a year. On top of the $100 per month that they have to give back to the state, their expenses went up by $110 per month.
Does this sound like a recipe for prosperity, or does it sound like a heavy burden? When I blog, I try to point out faults from both sides of the political aisle. I am a Republican, but I am fair in what I write. Everyone needs to take note, that it was a strictly partisan vote that was taken while we all slept last night. The democrats raised your taxes while you slept, enacting policy that will kill the dreams we have for our families.
An amazing article on taxes. Would read again. It’s amazing how Illinois budget is 1 billion, people be crazy!