Growth through tax hikes? Illinois tried it – and failed
Arguing that tax hikes are a precursor to growth and a flood of new residents is simply backward.
If you didn’t know any better, you’d think the recent opinion piece in the Chicago Tribune, “Tax me please, so Illinois can compete,” was a satirical article straight from The Onion.
In the piece, author Tom Geoghegan pleads, “Will somebody raise taxes in a serious way before everybody leaves?”
That’s an absurd question given Illinoisans already pay the second-highest property taxes and the 10th-highest combined state and local taxes in the nation, according to the nonpartisan Tax Foundation.
And if you’re in Chicago, apart from paying one of the nation’s highest sales-tax rates, you’re also nickeled and dimed with additional fees and taxes everywhere you turn, including those for parking, gasoline, beer, cigarettes, cell phones and most recently, services like Netflix.
People know when they’re paying too much for something or when they’re not getting enough value for their dollar. High taxes result in a naturally human response – avoidance.
It’s why Illinois drivers cross the Missouri border daily to fill up their tanks just to avoid Illinois’ double taxation on gasoline; why Chicagoans go to the suburbs to buy liquor and cigarettes to elude Chicago’s overly high sin taxes; and why companies and jobs have moved to Indiana to escape Illinois’ onerous property taxes.
It’s not that Illinoisans don’t want to pay taxes. They know taxes are needed to pay for roads, schools and public safety. But they want to know that their hard-earned money is being spent responsibly. And that’s a feeling Illinoisans and Chicagoans justifiably lack. Nearly three-quarters of Illinoisans don’t trust their state government – the highest rate in the nation.
Illinoisans shouldn’t be forced to pay more into a system they can’t trust. It’s the Tax Increment Financing districts, cronyism, corruption and mismanagement of pensions that have brought Chicago and Illinois to their knees. Not too few taxes.
Illinoisans can’t be fooled. They know that without reforms any new taxes won’t go to bettering classrooms, improving public safety or providing better services to the poor and disadvantaged. Instead, they’ll only go toward paying old debt and pension costs for work already done.
Nevertheless, some will continue to claim that without higher taxes, Chicago and Illinois will continue to lose businesses and residents.
But Illinoisans already know this argument doesn’t make sense – they witnessed firsthand the damage their state suffered after the massive 2011 tax hike. The hike, which raised $31 billion in additional state revenue through 2014, deflated any pressure on politicians to pass the real reforms necessary to control spending.
Filling Springfield’s coffers only allowed the state’s problems to fester. Without pension reform, the state pension shortfall grew by more than a third and now exceeds $111 billion. Without reforms to workers’ compensation costs and other policy pain points, the state’s employment record since the Great Recession was – and continues to be – the worst in the nation.
As a result, the exodus of people out of Illinois accelerated. The state lost a net 300,000 people to other states from 2011-2014 due to out-migration, according to U.S. Census data. In 2014 alone, Illinois lost a net 95,000 people to other states – a record high.
Billions more in tax revenues didn’t help those at the bottom of the economic ladder, either, as tax-hike proponents claimed. According to Senate President John Cullerton, 90 percent of the tax hike went to pay for the pensions of public employees.
Arguing that tax hikes are a precursor to growth and a flood of new residents is simply backward. Before Illinois politicians ask for another penny from the state’s hardworking taxpayers, the General Assembly needs to enact reforms that slash cronyism and corruption, fix pensions, cut wasteful spending and get the economy growing again.