The average Illinois household faces an increase in their state income tax bill of $1,598. A firefighter and a preschool teacher with two kids earning a combined $80,000 would pay $1,620 in higher income taxes under the tax hike deal – on top of the $2,160 they’re already paying. That’s money they can’t use to purchase a new water heater, buy winter jackets or put toward college savings.
Illinois already ranks near the bottom in job creation and competitiveness; this tax hike could be a fatal blow to the state’s struggling economy. Illinois’s economy could suffer a $17.3 billion reduction in personal income over the next three to five years as a result of this tax hike, translating into $3,625 less in personal income per household or the loss of 288,473 private sector jobs.
Destroys bipartisan federal tax relief.
President Obama, along with Congressional Democrats and Republicans, recently agreed that federal tax relief was necessary to spur the national economy and protect families. Raising state income taxes by 75 percent will take more than double the savings from the federal tax cut compromise.
Illinois would have among the highest corporate income tax rates in the world.
Illinois’s new 8.4 percent corporate income tax rate, combined with the personal property replacement tax and the federal rate, would give Illinois one of the highest corporate tax rates in the world – higher than France, Russia and Germany!
Hurts business competitiveness.
Illinois’s ranking in the Tax Foundation’s State Business Tax Climate Index would fall from 23rd to 35th as a result of this tax plan. Our individual income tax ranking would go from ninth to 15th, and the corporate income tax ranking would fall from 27th to 46th. This would push even more jobs across our borders as businesses rationally bypass Illinois when looking to start up or expand operations.
The flight of people, jobs and wealth from Illinois would intensify.
The tax hike would cement Illinois’s reputation as a high tax state. Consider that from 1998 to 2008, the ten lowest-taxed states had a 220 percent faster population growth rate, a 15 percent faster personal income growth rate, and a 58 percent faster employment growth rate than the ten highest-taxed states. This plan sends us in the wrong direction.
Property tax relief is “bait and switch.”
Real and lasting property tax relief comes from lower rates, not tax swap checks that could be eliminated at any time.
“Temporary tax hikes” are a joke.
Illinoisans know from experience that temporary tax hikes turn into permanent ones. No one believes that rates will revert back to a lower level.
Tobacco revenues are likely to be lower than expected.
Estimated revenue from the 102 percent tobacco tax hike is likely overestimated. According to economic modeling from the Mackinac Center for Public Policy, smuggling alone would limit the annual intake to about $250 million (instead of circulated reports of $377 million).
Spending reforms must come first.
Illinois has a spending problem, not a revenue problem. State spending is up 26 percent after inflation over the past 10 years. No amount of new revenue can fix the underlying problems until structural spending reforms – like a genuine spending cap – are implemented.
Tax hikes are politically unpopular.
A June 2010 poll commissioned by the Illinois Policy Institute found 62 percent of likely Illinois voters thought the state spends too much money. When asked how to solve this problem, 49 percent said cut important programs while just 34 percent wanted their taxes raised.
Last-minute, lame-duck shenanigans.
Legislators should wait until the new General Assembly is seated in mid-January before voting on big topics like a tax hike. This is not the “change” that voters demanded in November.
A vote for the tax hike is a vote for hastening Illinois’s economic decline.