Ill. faces 66 percent tax boost amid budget crisis

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I'm surprised Ant hasn't posted this yet. Please discuss...

Illinois Tax Hike

By DEANNA BELLANDI, Associated Press Deanna Bellandi, Associated Press - Wed Jan 12, 9:54 am ET
SPRINGFIELD, Ill. - Democratic Illinois lawmakers beat a looming deadline and approved a 66 percent income-tax increase in a desperate bid to end the state's crippling budget crisis.

Legislative leaders rushed early Wednesday to pass the politically risky plan before a new General Assembly was sworn in at noon, taking a slice out of the Democratic majority and removing lame-duck lawmakers willing to support the tax before leaving office.

The rate increase might be the biggest any state has adopted in percentage terms while grappling with recent economic woes. Nevertheless, Illinois' tax rate would remain lower than in several other states in the region.

The increase now goes to Democratic Gov. Pat Quinn, who supports the plan to temporarily raise the personal tax rate to 5 percent, a two-thirds increase from the current 3 percent rate. Corporate taxes also would climb as part of the effort to close a budget hole that could hit $15 billion this year.

"Governor Quinn today thanks the Illinois General Assembly for taking strong action to confront our fiscal crisis and provide the revenue and reforms needed to stabilize the budget, pay our bills and jumpstart Illinois' economy," a statement from his office said.

Quinn's office said the higher taxes will generate about $6.8 billion a year -- a major increase by any measure.

It will be coupled with strict 2 percent limits on spending growth. If officials spend above those limits, the tax increase will automatically be canceled. The plan's supporters warned that rising pension and health care costs probably will eat up all the spending allowed by the caps, forcing cuts in other areas of government.

[Related: California governor seeks to extend tax increase]

Other pieces of the budget plan failed.

Lawmakers rejected a $1-a-pack increase in cigarette taxes, which would have provided money for schools. They also blocked a plan to borrow $8.7 billion to pay off overdue bills, which means long-suffering businesses and social-service agencies won't get their money anytime soon.

House Speaker Michael Madigan, sounding weary, said Republicans should have supported some parts of the plan instead of voting against everything.

"They're on the sidelines. They don't want to get on the field of play," the Chicago Democrat said. "I'm happy that the day has ended."

But Republicans noted they were not included in negotiations. They also fundamentally reject the idea of raising taxes after years of spending growth.

"We're saying to the people of Illinois, 'For eight years we've overspent, now we're going to make it your problem,'" said Rep. Roger Eddy. "We're making up for our mistakes on your back."

The increase means an Illinois resident who now owes $1,000 in state income taxes will pay $1,666 at the new rate. After four years, the rate drops to 4 percent and that same taxpayer will then owe $1,333.

Republicans predict the tax eventually will be made permanent.

"It's a cruel hoax to play on citizens to say this is temporary," said House Minority Leader Tom Cross, R-Oswego.

Democrats bristled at being blamed for the state's financial problems, although they've controlled the governor's office and both legislative chambers since 2003.

They said some of the problem began under Republican governors and that Republicans backed some budgets that increased spending. They argued the national recession sent state revenues into a nosedive and that Democrats already have cut spending by billions of dollars.

"This mess is a mess that is the responsibility of all of us as Republicans and Democrats, of several different governors and part of the mess isn't even anybody's fault," said House Majority Leader Barbara Flynn Currie, D-Chicago.

The new tax money will balance the state's annual budget and let officials begin chipping away at the backlog of unpaid bills. Borrowing money, and then repaying it with a portion of the tax increase, would have allowed those bills to be paid immediately, aiding organizations that provide services for the state but go months without being reimbursed.

The delay and the spending limits are "very troubling" to those groups, said Sean Noble, policy director for Voices for Illinois Children, a member of the statewide Responsible Budget Coalition. Still, he called the tax increase "an enormous step" toward putting Illinois on sound financial footing.

The proposal passed the House on Tuesday night 60-57, the bare minimum. No Republicans backed the measure there or in the Senate, where the measure passed 30-29.

The governor has refused to discuss the tax proposal publicly, although his aides say he supports it. During his election campaign, Quinn promised to veto any tax plan higher than his proposal for a 1-point increase.

Republicans accused Democrats of doing irreparable harm to Illinois families and businesses. Business leaders decried the proposal as a job-killer.

"Based on this particular legislation the only businesses that will benefit are the moving companies that will be helping many of my members move out of this particular state," said Gregory Baise, head of the Illinois Manufacturers' Association.

[Related: Major organization backs Idaho cigarette tax increase]

Democrats countered that even with the increase, Illinois' tax rate will be lower than in many neighboring states -- Iowa's top rate is 8.98 percent, Wisconsin's is 7.75 percent. They also maintain that without more money, state government may not be able to pay employees by the end of the year. Major government services might have to be halted, they warn, and groups waiting for state payments will go under.

Spending limits were added to the plan to win the support of some suburban Democrats. Republicans said the limits don't do enough to clamp down.

The limits allow next year's spending to increase considerably so the state can make its required contribution to government retirement systems, pay overdue bills and cover other costs that had been shoved aside. After that, however, spending could not grow more than 2 percent annually for the next three years or else the tax increase would be reversed.

"We're really trying to handcuff ourselves and the governor in our spending," said Illinois Senate President John Cullerton, a Chicago Democrat.

Region: 
United States - West
United States - Midwest

Comments (85)

Jan 12, 2011

Oh I've been following this felony in action. Let's see, over spend, refuse to cut, no desiredor efficiency, let's just raise taxes again. Chicago keeps losing people and they wonder why.

Let's steal more from hard working people because the elected officials manage money like 16 year old girls.

Chicago just keeps taking it up the butt. More and more, people work for others benefit, not their own. I hot everyone adjusts thier pre tax deductions to minimize this criminal act and keep Chicago from maximizing their I'll gotten gains.

Jan 12, 2011

This is a good move. Illinois has finally come to its senses. I'd prefer reduced spending to increased taxes, but increased taxes are better than increased debt- especially when the state is starting at a 3% state income tax as it is.

I think a few businesses will move to lower tax Indiana or Michigan, but most will stay in Illinois. Chicago offers 90% of what New York offers in terms of people, services, and businesses, at (now) 40% of the income taxes.

The next step, though is spending cuts and a deal with the pensioners. I think IL needs to sit down with the pensioners and perhaps the bondholders and announce they need to impose a 20% state income tax on all pensions and bond interest paid by the State of Illinois. Effectively a restructuring without actually calling it as such. That would get the pension fund from ~55% funded to ~70% funded. Wouldn't be popular with bondholders or pensioners, but it gets the state back to reality without a technical default.

    • 1
Jan 12, 2011
IlliniProgrammer:

This is a good move. Illinois has finally come to its senses. I'd prefer reduced spending to increased taxes, but increased taxes are better than increased debt- especially when the state is starting at a 3% state income tax as it is.

I think a few businesses will move to lower tax Indiana or Michigan, but most will stay in Illinois. Chicago offers 90% of what New York offers in terms of people, services, and businesses, at (now) 40% of the income taxes.

The next step, though is spending cuts and a deal with the pensioners. I think IL needs to sit down with the pensioners and perhaps the bondholders and announce they need to impose a 20% state income tax on all pensions and bond interest paid by the State of Illinois. Effectively a restructuring without actually calling it as such. That would get the pension fund from ~55% funded to ~70% funded. Wouldn't be popular with bondholders or pensioners, but it gets the state back to reality without a technical default.

I don't think there is anyway they can stop spending. They can't help it. No way in hell will they deal with the pensioners, not enough balls to slap the hand that feeds them.

Jan 12, 2011

So let me get this straight. I steal your create card, run up a huge balance, can't give you any money so you are happy paying it down rather than having a high balance.

I used to wonder why cattle walks so calmly to the slaughter house. Now I realize we do the same thing.

It's like being raped and having your rapid say to you "at least I wore a condom"

People in Chicago should be enraged!

Jan 12, 2011

Democrats, party of crimbal theft. Nobwonder why people are angry. High school drop outs can balance a household budget. Our elected criminals can't figure it out.

Jan 12, 2011

I'm not really sure angry rhetoric helps things. These problems didn't start under Blago, and before that, you've got two decades of (R) governors and state legislatures.

High labor costs haven't been good to the state and the unions haven't been very helpful on that front either on the public or private side, but I think it's best for us to talk about how we can fix things going forward.

I really think Illinois needs to restructure. It would also be nice to see everyone who's served in the IL legislature over the past 30 years also take a haircut on their retirements.

Then we need to start talking about 10% pay cuts for everyone who works for the state, perhaps 30% for elected officials.

IL doesn't really go crazy on services and spending. It's not New York or New Jersey. There's graft in Illinois, but there's graft in Florida, too.

Perhaps elected officials' pay should be inversely tied to the number of fraud indictments handed out against politicians in the state.

Jan 12, 2011

"66% tax increase" makes it sound worse than it is. It is essentially a different of $100 a month for someone with an IB analyst income.

Jan 12, 2011

If an accountant fudges the numbers, lies to their client, etc you don't just give them more money and say thanks. These people have a fiduciary responsibility. We entrust them with our money and look at what we get in return. This isn't angry rhetoric, this is bold face lying and misappropriation of funds. Criminal, flat out. SOX made management lawfully responsible for what they sign, maybe we should do the same for these cheats.

I don't know, my taxes didn't go up by 66% and I am still pissed.

Jan 12, 2011

Pathetic if you ask me, passed by one vote at 1:00 AM before the new assembly was to be sworn in. What great news to wake up to....

Represent the people my a**.

Jan 12, 2011

Well, many of the people who started this mess have been fired. Blago, Ryan, Edgar- they're all out of office.

I'm not saying the current governor is the best guy for the job, but he didn't cause this mess, either.

Maybe it's easier to get stuff done and actually fixed if we tone down the demagoguery. Dems (and libertarians) learned this in 2006. Rather than campaigning on getting Bush impeached, they started talking about how we needed a change in strategy in Iraq and how we were maybe going too far on the War on Terror. It worked. Independents stopped giving knee-jerk reactions when they stopped hearing the words impeach, realized the Dems weren't extremists, and voted the Republicans out of office.

Republicans need to start doing the same thing. Calling people criminals might win ratings, but it doesn't win votes in the Illinois Senate and it doesn't win elections.

Jan 12, 2011

Calling someone a criminal when they are is telling the truth. People who pay taxes will vote for you. Winning should be the issue, not engaging in practices that waste money you are supposed to Shepard and protect should be the goal.

I call a spade a spade. I think Chicago would be just fine if they made due with the already large aim they take from hard working peoples pockets.

Jan 12, 2011

Calling someone a criminal when they are is telling the truth. People who pay taxes will vote for you. Winning should be the issue, not engaging in practices that waste money you are supposed to Shepard and protect should be the goal.

But the thing is that they aren't criminals yet. They haven't been convicted of any crimes. Hence, you can't call them criminals until it's been proven in court.

You are like the church mom who calls ladies who get abortion murderers. I always joke that they're technically incorrect- since the women don't know a fetus is human, it's really more like manslaughter. :)

People who pay taxes will vote for you. Winning should be the issue, not engaging in practices that waste money you are supposed to Shepard and protect should be the goal.

Look, the fact is that we have elections, and one of the problems with democracy is corruption. It's a problem that we have to keep under wraps, but it sure beats the problems involved in dictatorships and plutocracies.

I call a spade a spade. I think Chicago would be just fine if they made due with the already large aim they take from hard working peoples pockets.

See, now we have moved on to a more constructive discussion. Yes, the Republicans, Dems, and a whole bunch of other pols wasted a lot of money and dug us into a lot of debt. Now we have to dig ourselves out. We can talk and talk and argue about who got us into this mess, or we can work on getting ourselves out.

Jan 12, 2011

IlliniProgrammer I like your style.

Jan 12, 2011

Cool guys, enjoy paying more taxes. Who defends increasing taxes yogic a mistake created by political stupidity is beyond me.

Jan 12, 2011

Guys,

I don't have time to read all of the responses right now, but as an IL resident this stuff drives me nuts and I will join the conversation later tonight to read your responses.

A few things to keep in mind:
- This STILL won't pay off the deficit even excluding pension obligations (which are insane).
- Lawmakers are already talking about other spending for schools, etc instead of paying down the deficit with this money.
- The thing that kills me is all these morons in this state are pissed. QUIN RAN WITH THIS TAX INCREASE AS HIS MAIN PRIORITY! This was no secret. We let the lazy asses that don't work (and therefore pay no taxes) vote these guys in. These guys then perform their political robinhood act and get re-elected.
- I hope everyone realize that IL is the MOST F'ed state in the country, probably the most politically corrupt and their reach does get to DC. The Chicago machine is a beast - as Rahmbo is coming back to take over Chicago mayor Daley's brother gets to go take his old spot in the white house. Its a game of corrupt musical chairs.

twitter: @CorpFin_Guy

Jan 12, 2011

I was just reading the WSJ article. Citizens of Chicago should protest every voting members house, office, etc. These people facilitate criminal acts against American citizens. The more we pay the more we become sheep.

Government an elected officials have one job, serve the tax paying constituency. They have been and continue to serve only themselves.

Cut the budget, cut it deep and across all avenues. Live with your means, no exceptions.

Jan 12, 2011

Nobody is supporting the tax hikes, but the rhetoric has gotten way too shrill for us to get anything done.

First off, I think we need to start off with the honest truth:

Tax hikes are better than debt hikes. I think everybody reading this who works in finance understands this. Pain now is generally easier than pain later and delay of gratification tends to wind up being a good thing. It's better for us to come to our fiscal senses and realize that a unionized state has a bigger cost than we've been taxed in the past. (I use "we" in the sense that I was an IL resident for 22 years, though I'm not anymore.) We're doing the same thing in NJ.

We also need to admit that many things in the state are necessary. Roads. Police. Education.

Finally, though, we need to cut everything else out and find ways to make those things the state does more efficient. I am not sure why only two out of the five people at IDOT are working whenever I go in to get a driver's license. Ironically, at the NJ MVC, I actually get better service and more helpful staff (just with more red tape.)

Also, why do some terribly-performing school districts on the south side of Chicago need $17K/year/student in funding when most school districts in the state cost around $6K/student/year?

How much do tollbooth operators make? In NY, it comes out to $70K/year. I am not sure what it is in IL, but if it's more than $50K/year, why not offer some Wal-Mart checkout counter ladies a $5/hour raise?

I think a great way to solve some of these problems are to make IL a right-to-work state and eliminate medicaid or at least bar people on medicaid from using food stamps to buy foods high in trans fats.

There. Those are a few quick thoughts. We need to cut inefficiency, but we also need to realize that there is a necessary scope to state government and therefore, a necessary cost. IL would never be able to survive on 1% tax rates. Maybe it could have gotten by on 3% had we not thrown it out the window on a bunch of teachers who can't even spell the word incompetent and gastric bypass surgery for folks who spent their food stamps on potato chips. But that's behind us. Now we need to move forward and figure out how to cut the graft and inefficiencies

That's how you make progress. You disarm your opponent by admitting what reality forces you to admit. Then, you get your points in about what reality forces them to admit. And at the end of the day, we settle on something a lot better than what we currently have and much more reasonable than either going communist or executing all of the politicians and union leaders.

Jan 12, 2011

Here's a little more fuel for the fire. The geniuses running Chicago sold all the parking meter revenue for the next 75 years to a Middle-Eastern consortium to stop-gap a one-year budget shortfall. Of course, the first thing the new company did was jack up parking rates, get rid of free parking hours, and now the city has to get permission from the company if they want to close a street to have a parade or something. Classic. You can read all about it in Taibbi's last book:

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

Gee, I wonder why Illinois doesn't have any money???

Jan 12, 2011
Edmundo Braverman:

Here's a little more fuel for the fire. The geniuses running Chicago sold all the parking meter revenue for the next 75 years to a Middle-Eastern consortium to stop-gap a one-year budget shortfall. Of course, the first thing the new company did was jack up parking rates, get rid of free parking hours, and now the city has to get permission from the company if they want to close a street to have a parade or something. Classic. You can read all about it in Taibbi's last book:

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

Gee, I wonder why Illinois doesn't have any money???

They almost sold midway airport too. On top of that, the major airlines are trying to delay the expansion of O'Hare. What else can go wrong with Chicago? O wait...they also lost the Olympic bid (good or bad depending on your perspective).

Jan 12, 2011

Cut every program until rev=liabilities. Real simple. No salary for politicians either. They are the most incompetent people ever. Fire every unionized state worker also. Buy out their pensions, increase their healthcare costs, decrease their pension payments. Ban unionizing government employees. Cut taxes for individuals and businesses. Bring up criminal or civil charges against elected officials.

Rhetoric is civilized. We used to tar and feather these losers. They lie, misrepresent, manipulate, steal and WE are supposed to remain calm? Get real. Chicago is a dump and what is happening there solidifies my low opinion of out "president".

Only good thing that ever came from Chicago is batman. Can't trust a city that fucks up pizza.

Jan 12, 2011

Eddie, that's pretty easy. The City of Chicago gave the middle eastern consortium air and got money in return.

It's called eminent domain. Use it to buy the parking meters back for half the price the city got for it. Hey, it's a recession.

Jan 12, 2011

Just so you don't think I'm making this shit up:

http://ohmygov.com/blogs/general_news/archive/2008...

If President-elect Obama is planning on visiting the old neighborhood in Hyde Park anytime soon, his motorcade better bring plenty of quarters. Mayor Richard Daley recently completed a deal to lease all 36,000 of Chicago's parking meters for the one time lump sum of $1.2 billion. The deal will transfer the meters into private hands for the next 75 years.

According to the Chicago Tribune, the deal will result in the quadrupling of meter costs in two-thirds of the city's meters. Neighborhood spots that previously cost 25 cents an hour will go up to $1 an hour, and eventually $2 an hour by 2013. The meter rates in the downtown Loop will rise from $3 an hour to $6.50 an hour within the next five years.

And Chicago won't see a penny of the increases. In fact, Chicago cops will have to pay more when they stop for donuts.

Jan 12, 2011

I don't see the big deal Eddie. Chicago is always free to stop enforcement for a couple months, and after people stop paying the meters, revenue goes down, the parking emirates panic and realize their investment is worth a whole lot less than what they paid for it, and we eminent domain them back at 1/3 what they sold it for. Hey, they did it to our oil companies back in the '70s.

Jan 12, 2011

IP, I'm not sure if you're being funny or I'm misunderstanding you.

Are you suggesting that Chicago should use eminent domain to steal back property they sold? As far as enforcement, it's no longer the city's prerogative to enforce anything. They sold the whole shootin' match. Parking, towing, the whole ball of wax. Somebody doesn't pay the meter, it ain't Chicago writing a ticket, it's the company coming to tow their shit. Chicago is out of the loop.

Jan 12, 2011
Edmundo Braverman:

IP, I'm not sure if you're being funny or I'm misunderstanding you.

Are you suggesting that Chicago should use eminent domain to steal back property they sold? As far as enforcement, it's no longer the city's prerogative to enforce anything. They sold the whole shootin' match. Parking, towing, the whole ball of wax.

Not really. Chicago could just as easily pass an ordinance making it illegal to charge more than 10 cents/hour on city streets ala rent control ordinances in New York, which after numerous lawsuits, have all been found to be constitutional. Then Eminent Domain them back- offer the Emirates 15 cents on the dollar, since the value of the parking spaces are a whole lot lower now that they're regulated and limited in the fees charged. (This is what New York City did to the subways).

After that, nobody on the OTHER side of the transaction will be dumb enough to let Chicago do something so stupid again.

That's why I'm saying that for a city like Chicago, it's free money. Nobody in this country is foolish enough to get involved in something so political with a city this dumb. Chicago had to go abroad to find suckers to pay them $1.3 Billion for something the city can just come back and regulate out of existence. I actually think the city was kinda smart on this move. Just give it a couple years.

NEVER buy anything traditionally handled by the government from the city or state. Especially in a city like Chicago or a state like New Jersey.

Jan 12, 2011

Big freaking deal!

The tax rate of Illinois even at the increased level of 5% is STILL one of the lower ones in the country. The majority of southern states have HIGHER taxes!

Texas and the other few "zero tax" states dont charge income taxes but kill you with property, etc taxes.

The key now is to slash the spending necessary and balance the budget ASAP. After balancing the budget pass a law forbidding deficits.

To balance a budget, you MUST increase revenue and cut spending. You cant have it just one way despite what crazy partisans on both sides think.

Jan 12, 2011

Insanity is doing the same thing and expecting different results. These fools make bad decisions like it is their job (oh wait, they are elected officials, it IS their job!) and the answer is to give them more money. Sure. Peace out Illinois.

What they should really do is default on their debt. Us this as a way into bankruptcy. Break the backs of the public workers unions, cut the budget, cut the pensions and come out lean and mean. Yeah, no one will lend them money anymore, but that is a good thing. If they cannot max out the credit card maybe they will learn how to live within their means.

Mark my words, this felony (aka tax increase) will be wasted and they will still be broke. Nothing will change, except more people will leave and those who stay will be poorer.

There is a reason why we used to tar and feather the tax collectors. They are stealing from us. Fact. Some people are cool with getting robed. To each their own I suppose.

Jan 12, 2011

Illinois=Gorbachev's idea of market economics.

Nuff said.

Jan 12, 2011

@ ANT:

More people will leave? To where??? At 5% Illinois still has one of the lowest tax rates in the country.

A LOT of conservative southern and western states have HIGHER taxes than Illinois even at the increased rate.

Go check out the tax rates of Miss., Alabama, Georgia, etc and it will surprise a lot of you.

Lets stop acting like its the end of the world.

    • 1
Jan 12, 2011

Illinois capped spending at 2% increases for the next several years. Given inflation has historically tracked at about 4%, that really means 2% spending cuts for the next several years. Note that although this will mean a moderate hit to IL's GDP, revenues should be expected track inflation + real GDP growth minus maybe a few percent for the higher taxes.

I hate to say it, Anthony, but the country has been under Reaganomics for the past 30 years. Tax and Spend got replaced with borrow and spend 30 years ago. A lot of that was Reagan's doing- though a Democratic house didn't help things. We do need to cut spending, but it looks like the Dems in Illinois are intent on returning to the '70s where budgets were balanced and the economy was anemic rather than hike taxes, keep borrowing, and hike spending even further.

I think the suburban Dems need to be running the show. They were pushing for a lot more spending cuts. But the bottom line is that Illinois would probably have to cut essential services to keep income taxes at 3%. Maybe we can bring the tax rates down to 4% if we focus on cutting more fat, but Illinois' income tax rate started off exceptionally low and it's still pretty darned reasonable. Compared to NJ or NY, Illinoisans shouldn't complain. And if spending goes up, the tax hikes end.

Jan 12, 2011

http://www.money-zine.com/Financial-Planning/Tax-S...
5% isn't that low dude. Many states, MANY lower.

Regardless. I didn't realize jacking tax rates by 2% was cool because everyone else is doing it.

Listen, suppose 49 states in America had 30% state income tax. Illinois had 3%. If they increased it to 2% it would still be robbery, still be outrageous and still be bullshit.

Sheeple. Flat out.

They piss away money, they borrow beyond what they pay for and then they jam a 2% increase and talk about how it isn't that bad. Sure. Enjoy guys.

Jan 12, 2011

Many states have lower??? How??

Remember the 5% is the TOP bracket. Illinois with a 5% top bracket still has one of the lowest in the country. 60% of States have 5% or higher. A few have 4.3 or 4.5% but thats it.

And the businesses are moving no where. If they wanted to move to the "zero-tax" states like Texas, they would have moved years ago. But it turns out there is a catch to the "zero-tax" gimmick. You get killed on other taxes and you find yourself in a state with a horrible educational system and poor infrastructure (aka Texas).

Texas is in for HUGE budget deficit this fiscal year. (shocking I know!) I am sure they will hike property taxes again and tack on a host of other fees while severely cutting their already abysmal education and health budget just to keep having the "zero tax" moniker.

Look, I am as frustrated with inefficient government as the rest of you, but it needs to provide services and I dont think 5% is too much for a big state like Illinois. Personally I wish the Fed could limit itself to say a 20% top rate while each state limits itself to 5%.

Tax is not robbery. The government is elected. Its not like we live in a dictatorship or monarchy. We pay taxes to a public trust.

Jan 12, 2011
silhouette_semi:

Many states have lower??? How??

Remember the 5% is the TOP bracket. Illinois with a 5% top bracket still has one of the lowest in the country. 60% of States have 5% or higher. A few have 4.3 or 4.5% but thats it.

And the businesses are moving no where. If they wanted to move to the "zero-tax" states like Texas, they would have moved years ago. But it turns out there is a catch to the "zero-tax" gimmick. You get killed on other taxes and you find yourself in a state with a horrible educational system and poor infrastructure (aka Texas).

Texas is in for HUGE budget deficit this fiscal year. (shocking I know!) I am sure they will hike property taxes again and tack on a host of other fees while severely cutting their already abysmal education and health budget just to keep having the "zero tax" moniker.

Look, I am as frustrated with inefficient government as the rest of you, but it needs to provide services and I dont think 5% is too much for a big state like Illinois. Personally I wish the Fed could limit itself to say a 20% top rate while each state limits itself to 5%.

Tax is not robbery. The government is elected. Its not like we live in a dictatorship or monarchy. We pay taxes to a public trust.

Please don't turn this into a pissing match about whose state is better. Simple fact of the matter is a tax increase of 66% is insane no matter what the overall rate is.

Jan 12, 2011
txjustin:

Please don't turn this into a pissing match about whose state is better. Simple fact of the matter is a tax increase of 66% is insane no matter what the overall rate is.

I am not from Illinois, am PA. But the fact remains, the TX property and other taxes are insane. TX also has a woeful educational, healthcare, transportation and infrastructure system - compared to the rest of the country. Those are also facts. Inspite of ALL of this, Texas is still running a massive deficit.

And no, a 66% increase on a small amount is not the equivalent of a 66% increase on a larger amount. Financially, mathematically or however it is diced.

Jan 12, 2011

ANT, I think the fact that other states have lots of taxes reflects the reality of the situation.

Most people would agree that Hong Kong's government is very efficient. I think their tax rate is around 15-20%. They don't have a retirement system or a military. Military, defense, and war on terror spending represent about 30% of our budget right now. Tack on another .3x42=13% for that, and hong kong's tax rate would be somewhere around 30%. Illinois' total tax rate- excluding social security and medicare- is around 40%. Before we get to differences in government services, Illinois and the federal government combined are 75% as efficient as Hong Kong when it comes to income taxes. There's obviously a lot of fat to cut- hundreds of billions of dollars of it, but I don't think it's as awful as you make it seem.

Jan 12, 2011

I gave you the link, feel free to count yourself. PA, FL, TX, that is 3 right off the top of my head.

Illinois has a flat tax rate. Other states are tiered.

Elected? Sure man. Keep telling yourself that. Did you elect people to create this deficit? Would you hire an accountant who couldn't do your books? Would you pay for a guy who painted your house another color? Different parties might have different priorities, but wasting money, creating huge deficits, ignoring the problem and then not cutting the budget is not enough.

From the 2011 Budget on the Illinois website:

"In Illinois, we are facing a record $13 billion deficit for fiscal years 2010 and 2011. We need
immediate, decisive and comprehensive action to solve this structural deficit. A combination of
spending reductions, federal assistance, strategic borrowing, revenue generation and job growth is
imperative to balancing our budget and imposing fiscal discipline"

"While revenues have declined approximately $2 billion in the last three years, pension costs have increased over $2 billion. Without stabilization, the problem will only compound in years to come. "

  • If you are working for the state and unionized, you are the problem. Cut pay, reduce hours, freeze wages, increase health care contributions, fire, lay off, close positions, anything and everything to shrink ASAP. This is their response:

"The budgeted employee headcount total for fiscal year 2011 will increase as the Department of Human Services and the Department of Corrections address costly overtime issues by increasing staff. Additionally, state reform and federal stimulus programs will necessitate an increase in some agencies."

  • They refuse to cut head count. Adding employees creates long term issues. Those federal programs are high speed rail and weather proofing crap. Federal Govt can save money by canceling that waste and Illinois can lay off these people. SHRINK DO NOT EXPAND.

53,227 - FY 2009 54,023 - 2011 THIS IS THEFT IN ACTION. We are broke, but lets keep spending.

2.5Billion for Elected Officials and Election - Increase of 1.1Billion - GUT THAT SHIT
(Office of the Governor went up 84MM itself)

39.8 Billion for Government agencies --- Increase of 1.4 Billion - GUT THAT SHIT

11.9 Billion for Education ---100MM increase --- GUT THAT SHIT

Now I am not even getting down and dirty. That was the quick run. If you held spending at last years levels you would save almost 3 Billion. That is 6 Billion over two years and have the deficit. Now if they do some cutting you wont have to raise any taxes. Just think of how many paper pushing jobs you could eliminate, how many things you could automate, how much you could cut. Think of the waste. Imagine once the economy turns around and you have this slimmed budget. Imagine how quickly you will balance the budget, not have to deal with wasted interest payments. You can start reducing taxes then. Giving money back to the people who earn it.

Don't talk to me about a "needed" tax increase.

Jan 12, 2011

WSO, I am sorry. I am wrong.

I 100% support increasing everyones taxes. Give it to the government, they know what to do. All the waste in the past will not continue in the future. They have learned their lesson. You know how you wanted to buy a new TV, nope. The people in office do not think you need it. It's ok though, the will of the people is all the matters.

You do not work for you and your family. You work for someone else's family.

I am a criminal for thinking people who work should keep their money and government should be responsible for wasteful spending and improper use of your funds. I apologize.

Enjoy the tax increase, I am sure that it will solve everything and it will never happen again.

Jan 12, 2011
ANT:

WSO, I am sorry. I am wrong.

I 100% support increasing everyones taxes. Give it to the government, they know what to do. All the waste in the past will not continue in the future. They have learned their lesson. You know how you wanted to buy a new TV, nope. The people in office do not think you need it. It's ok though, the will of the people is all the matters.

You do not work for you and your family. You work for someone else's family.

I am a criminal for thinking people who work should keep their money and government should be responsible for wasteful spending and improper use of your funds. I apologize.

Enjoy the tax increase, I am sure that it will solve everything and it will never happen again.

Ant, as usual, I'm 100% with you on this.

Jan 12, 2011

We got it.... ALL tax (in a democracy no less) is bad!

We get it.

Best Response
Jan 12, 2011

HK also has no capital gains taxes

IL also has the highest sales taxes (Cook Cty. pardon)

ABOVE ALL

Illinois has a HUGE welfare minded population. More than 1/2 of Chicago does not work ...and we definitely don't want to get into places like Rockford, Kankakee, Peoria, etc...

The issue with Illinois raising taxes is that (once again) it is THE WORKING MAN who is getting raped at gun point to keep the welfare, social security, unemployment check cashing crew bathing in their filth.

I'm all for the tax raise if it knocks of the 3 million Illinoisians (who have never worked a day in their lives) off the state's meal ticket...but then...how will guys like Barack Obama ever get enough votes?

Jan 12, 2011

1) Weak as response to a researched and thought out post. I didn't just pull it out of my ass dude, I went to the source.

2) Where did I say all tax is bad? I completely support taxes and understand their use. What I do not support is elected officials pissing away peoples hard earned money and then asking for more. A tax increase would be fine if it was needed. This is not needed.

Guys, I am not anti tax. I am anti theft. I support taxation, I just do not want to see our money wasted. People work hard for their paycheck, they spending a chunk of their life doing it. The money they give to the government should be revered. It should be spend wisely and efficiently. Anything less is criminal.

Jan 12, 2011

It still amazes me how I have to defend my position against this tax increase.

http://www.state.il.us/budget/FY2011/FY2011_Operat...
Go through the budget, line by line, and witness the BS.

You guys are getting robbed!

Jan 12, 2011

We're not asking you to defend your position, we're asking you to defend the rhetoric.

You are free to call the tax hikes a bad move. I am not sure there's a lot of evidence behind calling them criminal or totally unreasonable.

Give us an alternative. Tell us what line items of the budget should be cut instead. Perhaps we should have started with spending cuts before moving to tax hikes, but there's still a budget gap to fill.

Jan 12, 2011

Double post.

Jan 12, 2011

Causing the deficit through wasteful spending, ignoring issues and spending when you knew you did not have the funds and then passing a tax increase is criminal in my book. The government is demanding money, with threat of jail. Not exactly asking nicely. I might be taking some liberties with the word, but this isn't an George Baily asking to only withdraw what is needed. These guys F'ed the people of Illinois over.

I honestly don't have the time to go line item by line item on the Ill budget. I gave some solid examples. They are increasing government employee hiring. This will contribute to the long term financial issues. I understand not cutting some areas, but don't tell me that you cannot reduce head count by 10%. At least hold it steady for godsake.

Without going line by line, by just going by large grouping, if they kept spending fixed at FY09 levels, they could save 3 BILLION dollars. By making cuts, reducing pay, laying off workers, shelving projects, etc they could easily cut money.

Illini, when you lose your job, what do you do. You cancel cable, you lower your cell phone plan, you stop eating out, you iron your own clothes. Everyone trims the budget. They are expanding the budget in all meaningful areas. What the hell is up with that? Asking for an increase in tax BEFORE you cut is bull crap.

You and I both know that if we sat down with the financial statements and a red pen we could balance this thing. Balance it with minimal unnecessary suffering. If after a strenuous cutting session, where pain was felt by all, a tax increase was still needed, fine. Do it. There has been no pain, no cutting. I illustrate that above. I went to the official budget, their numbers, not mine. No pain, no cutting.

Taxes are the easy solution. 66% on a small number might be nothing, but it is still taking money from people. Illinois has an 11.6% unemployment rate. Higher than the national average. Those that have jobs and hanging in there. These people do not need to be taxed more.

Jan 12, 2011

Whatever mate. You still come from the world-view that tax is equivalent to robbery - so no need to continue the argument.

The gov. of Wisconsin was talking smack the other day about Illinois, yet his state's tax rate is 8%.

Am sure if the people of Illinois are so "enraged" they can go to good ol' Southern states like Mississippi or Georgia or wherever with their ...... with their dead-last in education, healthcare profile and third-world infrastructure .... and oh wait, 6% tax rate! ..... holy moly!

Jan 12, 2011

Thanks "mate". I come from the world view where I actually pay taxes and see my money wasted. Go try and support your arguments next time. I am still waiting for you to click the link, look at the Ill budget and refute anything I have said.

Jan 12, 2011

Turns out you are not the only one who pays taxes. I pay a shit load myself. I want my government efficient but I also dont want to live in a third-world country. A moderate amount of taxation is necessary.

Finally: If the people of Ill. are so "enraged", they can research the benefits of other states and move there. The internet is quite informative. They will find they get much more bang for their tax buck in Illinois than they do in 6% tax shit-holes like Alabama and Miss.

Have a goodnight.

Jan 12, 2011

IP you can't possibly agree with this?????? I am livid

Jan 13, 2011
LeveragedFiend:

IP you can't possibly agree with this?????? I am livid

I don't agree with it at all. Illinois needed to cut some fat first before it hiked tax rates. The legislature is totally incompetent and has no idea what it's doing.

But as someone who's lived in the Northeast for the past three years, I've learned you have to take this in stride. IL probably did need an income tax hike even after all of the spending cuts. Maybe not to 5%, but they did need to hike taxes- the state had some of the lowest in the country and there's only so much you can cut.

I am resigned to the following:

-The IL legislature has no idea how to cut spending. They're idiots. We can vote them out of office, and the unions will replace them with people who are at least 90% as dumb.

-Patrick Quinn has at least 10 IQ points on Blago- we'll find out if he has 20-30 on him over the next several years if he doesn't get caught selling political favors. He's actually trying to hold the line on spending and even push it back.

-Given that IL can't really get spending cuts, the only alternative to debt is tax hikes.

Jan 12, 2011

How Blue Can You Get? Old article, using 5.74% instead of 5%, but reads just the same. This will just increase spending or reduce cutting. Businesses will flee and so will citizens-they already have based on the 2010 census. Bureaucrats are destroying Illinois, I am ashamed to have grown up there.

http://www.investors.com/NewsAndAnalysis/Article/5...
This tax increase does not come close to solving budgetary problems. Look at what Illinois spends money on. How can anybody honestly believe that we need all those facocta government programs? It is a breeding ground of corruption and inefficiency. There is no way to make it better, more efficient, or cheaper- you cut it. This is disgusting.

Jan 12, 2011

So lower taxes = 3rd world? Florida has no state income taxes and they are fine. Texas has no state income taxes and it is home to some of the fastest growing cities.

Where did I say a "moderate" amount is bad? I have no issues with some taxation. When you add 5% flat income tax, plus sales tax, plus property, gas, etc you get a lot of tax.

Oh, daddy is going to school you. Please send me your tax money because you are getting a real education here.

I did some research. You know, back up my arguments. Try it some time.

IL TX FL

Inc 5 0 0
Sales 6.25 6.25 6
Gas 39 20 34.4

Population 12.8 25.1 18.8
% Change 3.3 20.6 17.9

UnEmp 9.6 8.2 12

Best State for 37 7 26
Business

http://www.forbes.com/2010/10/13/best-states-for-b...
Those figures were taken from BLS stats and http://retirementliving.com/RLtaxes.html
Here is another wonderful report for you to read (or not)

http://illinoispolicy.org/news/article.asp?Article...
Neither TX nor FL are "3rd world countries". They are all seeing a huge gain of people while higher tax states are seeing a loss of people. The Illinois budget can be cut and is not being cut. I have show you that using data directly from the 2011 budget. You talk about other states being more expensive and I show to you, using government data, that Illinois is in fact more expensive. Higher income, higher sales and higher gas tax. Gas and sales tax are directly felt by consumers, property owners and renters alike.

You call Alabama and Mississippi a shit hole, I say the same about NY and PA. If you actually look at the numbers, without NYC, New York State is a bigger dump than Alabama. City by city, Alabama wins.

PA is Mississippi between Philly and Pittsburgh.

Back your crap up next time.

Jan 13, 2011

To reinforce the point that people are fleeing states with high taxes:

Americans for Tax Reform compared the states gaining and losing congressional seats and found that "states gaining seats had significantly lower taxes, less government spending and were more likely to have 'Right to Work' laws in place."

ATR found the average personal income-tax rate in states losing seats was a high 6.05%. That average rate in states gaining seats was a more modest 2.8%. Per capita government spending is also lower: $4,008 for states gaining congressional seats vs. $5,117 for those that aren't.

Jan 13, 2011

Welcome Leverage. I enjoy your logical thinking and right side of the argument behavior. United we stand!

taxes = wages that could of been spent effectively, now wasted and pissed away

Jan 13, 2011

My very final post on this:

TX is so grand yet has a 27B deficit?

NY and the south are not equivalent in any way in the things that matter: education, healthcare, infrastructure. Compare the rankings of each state and relative to the nation as a whole and that stands out as fact.

PA is MS between Philly and Pittsburgh? Well, the two cities are holding up the tea-party middle. Its a burden we happily endure. And overall the comparison is a tad overdramatic considering MS is dead-last in the union in education.

Have a good night.

Jan 13, 2011

Anthony we will fight off these Krugman-loving monkeys!

Jan 13, 2011

Dude, how can you sit down with the spanking I just gave you. Facts brah, I need facts.

NY is not comparable to the south? Educationally? Get real man. Once you leave NYC, NY State is Alabama.

Are you telling me Texas has dirt roads and rope bridges? Get real. I actually know a LOT about southern state infrastructure spending and it is not shabby. Roads are roads.

Education? We talking high school or college? I don't think it is fair comparing multi lingual Texas with homogeneous upstate NY.

I do agree with you. It is an honor supporting and holding up the Tea Party, a party that represents real American values. Cool that you are a supporter.

Weak sauce friend. Come back with an argument.

Jan 13, 2011

http://www.ppinys.org/reports/jtf/educationspendin...
Look at how much NYS spends on education

http://www-958.ibm.com/software/data/cognos/manyey...
Here are public high school graduation rates.

Texas>NY

Florida is horrible. They also spend almost nothing on schools. I wonder if has something to do with the large retired population.

Regardless. More telling data. Educationally, Texas > NYS. When you exclude NYC, Texas > NYS in colleges also.

Roads:

http://www.overdriveonline.com/worst-roads-go-west/
Truckers know their crap. Texas the best, PA the worst. Booyah, I thought Northern Dem's know how to tax and spend. Hahhahahaha

http://www.nytimes.com/interactive/2009/01/25/us/2...
State by state Welfare break down

Texas > NY

Jan 13, 2011

Woah there silhoettte, that's enough Texas bashing out of you, especially since you have no idea what you are talking about.
As far as population movement, check the facts from the most recent Census-Texas is gaining FOUR seats in the House. Next closest is FL with 2. Lesson: People ARE moving to Texas and will continue to. From CA, from NY, from everywhere. Do you think that is just a random coincidence? And don't give me some Mexico BS as an excuse. See the following 2:
http://www.forbes.com/2010/06/04/migration-moving-... http://www.forbes.com/2010/12/06/top-states-people...

Now corporations-It is common knowledge that corporations are moving from Cali/elsewhere to TX for the taxes (or lack thereof) by the boatload. See Rick Perry's interview on Jon Stewart or..
http://www.bizjournals.com/houston/blog/2010/12/th... http://www.cnbc.com/id/37642856/CNBC_s_Top_States_...
Ireland does the same thing with corporate tax rates in EU, and their biggest victory in the bailout was fighting the pressure from Germany and France to raise those taxes (and winning that battle). There is a reason those countries want that tax raised so badly.

From Meg Whitman, former CEO of EBAY: "Texas isn't a perfect state on every dimension," she said, but it does "have a much better business climate than we do."

"They are creating jobs; they are attracting businesses from all over the country," Ms. Whitman said. "And you know they are looking to California for jobs because they know in Texas taxes are lower, regulations are more streamlined, and they compete."

And lol at "infrastructure"--what does Texas not have? Where do you think your energy comes from? Texas is possibly the only state that could operate fully as an independent nation (not saying they'd be better off but still).
There are multiple big cities, farms/ranches w/ food, livestock, cotton etc, tons of cheap labor (thanks MX), lumber, stone, metals, the oil and gas that basically powers the entire US (out of Houston), plenty of factories (cars in San Antonio, lots of other stuff), plenty of communications firms (ATT is out of Dallas), technology (Austin is a mini-silicon valley and growing rapidly), finance (all big firms have at least 1 TX office), large corporations (not just oil), roads/highways (as Anthony just proved), lakes/rivers/coastal access w/ big ports, universities and research centers, hospitals (Houston is bigtime medically), NASA (just in case..), military bases, gov't buildings, and plenty of land to keep growing...Am I missing anything? What a joke..

It's not a coincidence that Texas was the state to best survive the recession.

Jan 13, 2011
ibintx:

t. As far as population movement, check the facts from the most recent Census-Texas is gaining FOUR seats in the House. Next closest is FL with 2. Lesson: People ARE moving to Texas and will continue to. From CA, from NY, from everywhere.

And from Mexico...just sayin'

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 13, 2011
happypantsmcgee:
ibintx:

t. As far as population movement, check the facts from the most recent Census-Texas is gaining FOUR seats in the House. Next closest is FL with 2. Lesson: People ARE moving to Texas and will continue to. From CA, from NY, from everywhere.

And from Mexico...just sayin'

Ya I touched on that. Obviously true, but the point was that they are moving from all over the US too.

Jan 13, 2011

Ok, got that out. I actually came here to comment on the OP.
Although I usually favor lower taxes, I will say 2 things in favor of this move:
1. The thread title makes it seem way worse than it is. Yes it's a big percentage increase, which sucks, but they are raising the taxes from 3 to 5 percent, which is still way lower than many (most?) states. This is especially acceptable when you consider..
2. The state is a mess. They almost don't have a choice on taxes. They need to cut spending too, but at this point raising taxes might be better than rolling on towards default. Anything they can do to reduce the deficit is a good thing.
In my mind, this is an exception where I'm not completely opposed to the tax increase (especially since I dont live there ha). IL might need to cut spending AND raise taxes, at least for a little while.

Jan 13, 2011

I completely agree with you. I just felt like ANT pretty much ripped the kids life apart so there was no need to chime in.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 13, 2011

Gotcha. I think the point's been made. I started that before his last post. No hard feelings silhouette if you're out there still. As you see in my 2nd post, I actually agree with most of your first post about the IL topic this thread was for. And TX does have higher property taxes, although not that bad (still come out way ahead overall).
I'm not usually so heated about liberal/conservative arguments, everyone has their opinion and that's fine. Good to keep things from going too far one way.
But I do take the Texas comments personally, so that kinda set me off.

Jan 13, 2011

I'm from Illinois and I say Blagojevich has it right, we should just sell more senate seats to fix our budget woes

Jan 13, 2011

ANT

Anthraxing

Neoliberal

Turduckeons

...it aint easy making an acronym out of those letters and have it make sense...but i done did it

...it aint easy making socialism, corporate welfare, cronyism, hereditary politics go over in a free society but illinois done doing it all day, every day

...who cares if this post has no structure, capital letters, proper grammar, its right because i say it's right, if you don't like it fuck you

now that is how politics work in illinois

period

Jan 13, 2011

ANT = Ain't No Taxes

Done and done

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 13, 2011

Am
Not
Takin' BS

Jan 13, 2011

Also
Not
Turkish

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 13, 2011

Government workers should not be unionized. Flat out. Public unions are enemy #1.

Jan 13, 2011
ANT:

Government workers should not be unionized. Flat out. Public unions are enemy #1.

Coincidentally, the cover of the most recent Economist agrees with you.

http://www.economist.com/node/17851305?Story_ID=17...

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Jan 13, 2011
ANT:

Government workers should not be unionized. Flat out. Public unions are enemy #1.

The rich need to lead by example if they want an efficient government. And they largely do. But the fact is that we had much less of a something-for-nothing culture 20 years ago than we do today.

20 years ago, a 32 year old who didn't have a job and spent life writing books about how you can get something for nothing in the working world would have been considered a failure and an embarassment to his family. Today, he is considered a role-model for a bunch of kids, many of whom will become the establishment in this country in 20-30 years.

Want to demonize do-nothing unions? The working rich really have to start with our own do-nothings. IMHO, if you have a million dollars and you didn't accumulate the base principal it through a great deal of hard work and struggle, you're just some idiot with a million bucks who might as well have gotten the money from his parents or won the lottery.

The first step to telling the government workers earning $17/hour that they actually need to do forty hours a week of work is to stop buying books from people telling you that you only need to work four. We need a new set of role-models in this country- err, we need to go back to our old set of role-models, pre "Greed is Good" and "There is a free lunch".

Jan 13, 2011
IlliniProgrammer:

20 years ago, a 32 year old who didn't have a job and spent life writing books about how you can get something for nothing in the working world would have been considered a failure and an embarassment to his family. Today, he is considered a role-model for a bunch of kids, many of whom will become the establishment in this country in 20-30 years.

The first step to telling the government workers earning $17/hour that they actually need to do forty hours a week of work is to stop buying books from people telling you that you only need to work four.

I actually laughed out loud at this one, and I'm sure Patrick (another 32-year old embarrassment) got a good chuckle on his deck in Buenos Aires while everyone hashes this out at work.

Jan 13, 2011

I agree with basically everything ANT has said in this thread.

About 3 months ago a big manufacturing company left Illinois for Mississippi. The company was almost going under and in order to save themselves they had to freeze the pay for their Union workers. They had to vote on this measure. If the union allowed them to freeze their pay and pensions, the company would stay in Illinois. IF not...see ya.

About half the union voted against the pay freeze. The very next day the company said SEEEEE YA! and is moving their plant down to Missippi. 600 people out of work in Illinois because of the union.

hahah. Loved when I saw that. I will try to see if I can find the article on it later today when I get some time.

Jan 13, 2011

Haha, lots of posts.thru the night. I miss the good ol' school days of going to bed late! As an engineering consulting monkey on an 8 am conference, I couldnt afford the luxury.

@ ANT: You are completely right in your argument. Cheers.

@ ibintx: No hard feelings mate. This is an internet forum. Nothing personal against TX. If folks got upset than New Jersey denizens would be suicidal.
You might view me as a "li-bu-ral" but I consider myself more of a Ford/Nixon/Bush the Elder style Republican. I guess to most of you that makes me a RINO. Doesnt matter. But as such I do have a more expansive view of government.

As someone who doesnt carry a debt, I am fetishly pro-balanced budgets as opposed to anti-tax. You must do what is necessary. Reagan increased taxes in the early 80s and when things stabilized a bit he made some strategic cuts as well. He would be skewered in today's world.

Personally, I would prefer if the US moved more towards the Swiss style of taxing. Much lower federal taxes and higher state taxes. In Switzerland, where I went to college, (Mom is from Zurich), the cantons (states) do the taxes. Infact, the states handle immigration, taxes, education, health, etc. On your passport, you are listed as a citizen of your county and state! It ensures the citizens have close control of their money and their money stays in their districts, counties, as opposed as to another random state. I am not a big fan of the Feds distributing pooled money to states.

As for the US, I would prefer if federal taxes were capped at 5% for the top bracket, with the states allowed to tax up to 15% for the top brackets and the counties up to 5%. This way, the MAXIMUM amount of tax dollars go to your own neighborhood and locality. And it is a bit more transparent because local elections are much more frequent (yearly) and therefore pols are far more accountable.

For this to happen, the Fed will have to seriously cut the military, reform, cut or privatize SS, medicare and eliminate some departments. The states will have to seriously pick up the slack according to their needs.

Jan 13, 2011

If you control for birthrates (southern states generally have ~20% higher birth rates), the population shifts from 2000 to 2010 census are largely in the 45+ catagory in terms of North to South migration. While I agree, Texas is a great state tax wise to do business and California is terrible, my hypothesis is the primary driver is weather for migration. People don't like the cold, older people in particular. Couple that with lower costs of living and moving to Texas, Florida, the redneck riviera are attractive options for peoples twilight years (granted I'm loosely defining that as 45+, since 'retirement' age is relative). My guess is that weather is the variable with real predictive power and taxes are going to have a high covariance, at least for adult migration.

Jan 13, 2011

I wanted to point this out in a recent article regarding this tax heist, er tax increase.

"An allegedly non-partisan tax review board said that would cost a family of three making $60,000 a year another $1,080 in taxes."

http://www.cnbc.com/id/41057031
Portugal had a very successful bond offering on Wednesday.

There was a little hiccup with the sale of some three year notes that wound up being sold at a yield to maturity of 5.4%. The prior three year sale of Portuguese paper was at 4.06% yield, so the jump was wide.

But it got sold.

The good news was in the auction of ten year paper. The fact it got sold at all is good. The yield was a surprising 6.72% and it was oversubscribed by three times. Just the day before ten year paper was trading well north of 7%. I have mentioned that 7% level a couple of times. Dr. Ed Yardeni researched it and found that when Greece pierced 7% it was on the EU's doorstep for a bailout within 16 days. When Ireland's ten year paper reached 7% it was at that same doorstep within 21 days. 7% is not an affordable interest rate and marks the 'magic' point where it all hits the fan.

Maybe Portugal has bought some time.

The new tax increase for Illinois rising to 5%, may not be enough.

The Illinois House of Representatives passed a bill that raises the state income tax from a maximum rate of 3% to 5%. An allegedly non-partisan tax review board said that would cost a family of three making $60,000 a year another $1,080 in taxes.

That is hard to believe and would be a killer for such a family.

They also raised the corporate income tax to 7% from 4.8% and said, this is the best part, annual spending increases would be held to 2% a year. California just announced $12 billion in spending cuts.

As painful as they are, we are in the position of having no choice.

Illinois is projecting a $13 billion deficit on a budget of $26 billion and they promise not to increase it by more than 2%! No cuts? What are they thinking? And people and companies are going to react to higher taxes. They always do. These tax increases will not raise the expected amounts.

Meredith Whitney, famed financial analyst who predicted the housing collapse, was on CNBC Wednesday morning and seemed a little less worried about municipal debt. She now thinks there will be municipal defaults, but not state defaults. But the Financial Times of London ran a story that predicted the US municipal market is on the verge of a crisis that will rival Europe's sovereign debt problems.

Great.

Back overseas for a moment to Germany. Their GDP rose 3.6% last year, the best showing in two decades. Reunification was painful and expensive. Germany also had a bond sale yesterday. Five year notes were auctioned at a 2% yield which looks great compared to the rest of Europe. But the last auction only a month ago was at 1.73%, so the Euro issues are costing Germany since it is obvious any rescue will be mostly at their expense.

It is thought the EU is mulling over an attempt for a comprehensive answer to all ills. Rumors of a large loan to Portugal are working their way around. As is a potential debt buyback by the central bank, or guarantees by the bank. Ministers meet next week but the heads of State don't get together until February 4th. It's doubtful any earth shaking news will come out until then.

Some economists in China worry in a New York Times article that the most recent stated inflation rate of 5.1% is wrong by half. Who knows? But if directionally correct, the fact that loans made in the first week of January equaled all the loans made in December could indicate a still hot economy that needs sharply higher rates to cool off.

The US housing market is just the opposite.

Zillow.com, a real estate research house, said the month of November was the 53rd consecutive month house prices in the US fell on a year over year comparison. November 2010 was off 5% from the November a year earlier. Zillow.com says the total decline from the June, 2006 peak to November, 2010 is 26%, which is a larger decline that the one from 1928 to 1933.

Wow! Not a record you want to break.

Jan 13, 2011

I don't know about anyone else, but Ive never worked only a 40 hour week. I also don't consider an UG and 2 masters to be a vacation. Union workers are not in a competitive environment. No one gets a pension anymore. No one gets the wages they get without a lot of education.

Auto workers down south make 18 bucks an hour and have 401ks. Auto workers in Detroit make 30 bucks an hour and have a pension. That is what unionized labor does, distorts the market.

Unions have come full circle. They are not useful like they used to be. In some circumstances they are, but not in te post office or iRS or anything govt related.

Jan 13, 2011
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