Madigan wants to raise income taxes again
Illinois House Speaker Mike Madigan says Illinois’ income taxes should be increased to at least 5 percent.
Mike Madigan wants to raise income taxes – again.
The powerful speaker of the Illinois House of Representatives told an audience at the City Club of Chicago that hiking Illinois’ income-tax rate back to 5 percent – up from the 3.75 percent rate Illinoisans pay now – is the best way to fix Illinois’ budget woes.
It’s a proposal that should make all Illinoisans want to bang their heads against the wall, because it’s the same failed route politicians took less than five years ago.
In 2011, Illinois politicians voted in a temporary income-tax hike, bumping up the income-tax rate on individuals to 5 percent from 3 percent, and on corporations to 7 percent from 4.8 percent.
That temporary tax hike partially expired in January 2015, but over its lifetime sucked an extra $31.6 billion from taxpayers. That nearly equals what Illinois spends on all core government services (e.g., education, health care, human services, public safety) in a full fiscal year.
With that much extra cash, anyone would assume that politicians would’ve made a big dent in the state’s $8.5 billion backlog of unpaid bills.
At least, that’s what former Gov. Pat Quinn said his intentions were in taking more of people’s money:
“We have some temporary tax increases that are designed to pay our bills, get Illinois back on fiscal sound footing and make sure that our state has a strong economy.”
But in 2014, the state barely made a dent in its unpaid bills, which Illinois Comptroller Leslie Munger warned could rise to $8.5 billion again by the end of 2015.
That’s not all. In the wake of the tax hike, Illinois’ fiscal situation continued to get worse, and job creation sputtered.
Since the 2011 tax hike, major credit-rating agencies, including Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, have downgraded Illinois’ credit several times. Illinois now has the lowest credit rating of any state in the nation at just a few levels above “junk” status.
Despite dumping billions of the additional tax-hike revenue into the state’s government-worker pensions, Illinois’ pension systems are still among the worst in the nation, and their fiscal health has actually deteriorated despite the influx of new money from the tax hike.
The state also added more people to food-stamp rolls than to employment rolls. By August 2015, for every four post-recession jobs created in Illinois, five people had enrolled in the Supplemental Nutrition Assistance Program, commonly known as food stamps. Illinois is the only state in the region where food-stamp enrollment has outpaced job creation since the recession ended.
Job creation slowed after the tax hike was enacted. Illinois is dead last among the 50 states when it comes to putting people back to work after the Great Recession, still down 180,000 people employed over the recession era, according to data from the Bureau of Labor Statistics.
The 2011 income-tax hike failed to solve Illinois’ financial crisis – it simply gave irresponsible politicians more money to spend.
Illinois has spent decades stuck in the same tax-and-spend routine. This unwillingness to change has kept the state from having a balanced budget for more than a decade. Even now, the best budget proposal from the Illinois General Assembly was out of balance to the tune of $4 billion.
Politicians may be tempted to think that asking people to hand over more money will be an easy fix to what ails the state – but this path would simply doom the state to continued decline. In 2012, the year after Illinois enacted the income-tax hike, the state lost 66,922 taxpayers and their dependents on net to out-migration, according to the Internal Revenue Service, or IRS. They took $3.8 billion of taxable income with them. In 2013 it was another 81,117 people and $4.1 billion of taxable income. These numbers are the worst in recorded state history.
It would be naïve to think the same won’t happen again if politicians continue to ask for more money without reforming the way the state does business. Without reforms, Illinois can’t afford another income-tax hike.