Kristina Rasmussen was a guest on the podcast of the Tax Foundation to discuss this report. Listen to that podcast here.
The Problem As Illinois families dive into back-to-school shopping, smart moms and dads will account for how looming tax hikes will affect their household spending. A combination of the soon-to-expire Bush tax cuts (a series of tax reductions made between 2001 and 2006) and Illinois Governor Pat Quinn’s income tax hike plan would take a painful chunk out of the already-stretched family budget.
A report from the nonpartisan Tax Foundation found that the sunset of the Bush tax cuts at the end of 2010 would cost the average middle-income Illinois family earning $68,958 some $1,640 in higher taxes in 2011. Meanwhile, Governor Quinn’s plan to hike the state income tax rate by 33 percent would take an additional $600 away from that same family. More, if we’re to believe his budget director’s call for a 66 percent increase this coming January. Few families will have a $2,240 cushion in their kitchen table budget to make room for government’s bigger revenue grab.
One graph inside shows just how much Illinois families could be facing in higher federal and state income taxes in 2011. For example, a family with household income of $50,000 could face a higher combined income tax burden of almost $3,000 in 2011 compared to 2010.
Our hypothetical family comprises a married couple under age 65 (each earning half of the household total income), with two dependents under 17 years of age. They have no capital gains, dividend income, or Social Security benefits. They pay 5 percent of their income in state taxes, pay no real estate taxes, and have no itemized deductions, child care expenses, or tuition expenses.
The higher federal burdens were calculated using the Tax Foundation’s 2011 Income Tax Calculator (available at mytaxburden.org), and the Illinois state income tax was calculated by applying a net 2 percent tax increase on income (planned 5 percent minus existing 3 percent) after accounting for the $2,000 per person standard deduction.
Our Solution Congress should pass, and President Barack Obama should sign, a permanent extension of the Bush tax cuts. Illinois lawmakers should reject calls to increase the state income tax. Why This Works Illinoisans already spend on average 101 days—January 1 through April 11—working to pay their combined tax burden, making Illinois the 14th highest in number of days spent working each year to pay federal, state, and local government taxes. With unemployment high, businesses struggling, and working families pinching every penny, discipline and tough choices are needed on “The Hill” and at the Illinois Statehouse, rather than increased taxes that punish taxpayers.
Because the federal government and Illinois state government both have an unrestrained penchant for spending, the revenue from either of the planned tax hikes will be nowhere near able to close the deficits. Given the fact that significant spending reductions have not been made during a time of record deficits in Washington, D.C. and Springfield, we have absolutely no reason to believe that increased revenues from higher taxes will be used to control deficits. Rather, they’re likely to finance even more government spending.
National and state leaders need to have the courage to level with voters about the need for government spending reform before asking taxpayers to bail out government with higher taxes. Download the full report here.
