The average Illinois household faces an increase of nearly $1,500 in its state income tax bill. A head cook and an office worker with two kids, earning a combined $80,000, will pay an additional $1,527 in state income taxes thanks to the tax hike – 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 when compared to other states; 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 the tax hike, translating into $2,734 less in personal income per household or the loss of 217,519 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 personal income taxes by 67 percent will take away almost double the savings from the federal tax cut compromise.
Illinois now has among the highest corporate income tax rates in the world.
Illinois’s new 7 percent corporate income tax rate, combined with the 2.5 percent personal property replacement tax, gives 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 36th as a result of this tax plan. The state’s individual income tax ranking would go from ninth to 14th, and the corporate tax ranking would fall from 27th to 45th. This will push even more jobs across Illinois’s borders as businesses rationally turn to other states when looking to start up or expand operations.
Flight of people, jobs and wealth from Illinois.
The tax hike will 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 10 highest-taxed states. This tax hike sends Illinois in the wrong direction.
“Temporary tax hikes” are a joke.
This tax hike supposedly will sunset in 2015. Illinoisans know from experience that temporary tax hikes turn into permanent ones (Illinois Tollway, anyone?). There’s little evidence to suggest politicians in Springfield will make good on their promise to reverse tax rates in the near future.
Spending reforms still haven’t been adopted.
Illinois got into this fiscal mess in the first place because it 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 January 2011 poll commissioned by the Illinois Policy Institute found 72 percent of likely Illinois voters thought the state spends too much money. Only 33 percent said raising taxes was the solution to close the budget shortfall.
Last-minute, lame-duck shenanigans.
This tax hike was passed in the final, late-night hours of a lame duck legislature, without a vote to spare. All 12 outgoing Democrats voted for the tax hike. A majority of lawmakers who returned to the legislature this spring voted against raising taxes – they know this is something that Illinois families do not want and cannot afford.