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Government
Flight from Illinois to Continue as House Approves Historic 32% Tax Increase
2017-07-03
[Zero Hedge] With Illinois, which on Saturday morning entered its third fiscal year without a budget, facing a catastrophic downgrade, late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse. The bill passed 72-45. The House also approved a $36 billion spending plan minutes later on a 81-34 vote. According to the Sun Times, it cleared an initial hurdle on Friday with 23 Republicans voting "yes."

"While no one could say this was an easy decision, it was the right decision," House Speaker Mike Madigan said after the spending bill vote. "There is more work to be done." Dems said they would work with Republicans on other resolution of other issues on table.

The proposed tax increase will now head back to the Illinois Senate, which approved a revenue bill on May 23 with all Democratic votes as part of its "grand bargain" package. But Governor Bruce Rauner has said he’ll only support an income tax hike if it’s limited to four years and paired with a four-year property tax freeze. He’s also still seeking changes in workers’ compensation and pensions.

Commenting on the just passed House bill, Rauner said he’ll veto the revenue bill.

"I will veto Mike Madigan’s permanent 32% tax hike. Illinois families don’t deserve to have more of the hard-earned money taken from them when the legislature has done little to restore confidence in government or grow jobs," Rauner said.

"Illinois families deserve more jobs, property tax relief and term limits. But tonight they got more of the same." He also said in an emailed statement that "if the legislature is willing to pass the largest tax hike in state history with no reforms, then we must engage citizens and redouble our efforts to change the state."

Some commentators promptly countered that Rauner's veto will likely be overriden.

The tax bill passed with some essential Republican support: it needed 71 votes. But Illinois House Republican Leader Jim Durkin questioned how it will address the state’s $14 billion backlog. Durkin is seeking to get Rauner the "balanced budget package," he wants, which includes spending reductions and "meaningful reforms."

CNBC and Reuters, same topic.
Posted by:Besoeker

#15  CA has state income tax of ~13% with sales tax (state plus local) 7-9%

NY has state income at ~9%, sales (S+L)~8-9%

IL has lots of fees on top of their income+sales, e.g., their vehicle registration fees are higher than either NY or CA
Posted by: lord garth   2017-07-03 17:51  

#14  State personal income tax is currently 3.75% Flat Rate, Glenmore.

Lower than some other states for sure, but the sales taxes (6.25% state + County + Local) and plenty of other delightful county and municipal 'fees' more than make up for the seemingly lower state rate.
Posted by: Mullah Richard   2017-07-03 15:43  

#13  Is the cited income tax rate of 4.95% an average, a top rate or is there just one? If it's the top rate it will still be lower than a lot of states.
Posted by: Glenmore   2017-07-03 14:06  

#12  I have a lot of retiree friends (including from the Public Sector) that live in Illinois.

The private sector folks are kind of worried that one of the next steps might be asset forfeiture/nullification (as in anything held in local state or municipal bonds). I've been telling them for years that those were horrible investments, but there must be something in the water as the advice was mostly unheeded.

Private leases/usage agreements for public lands might bear review too, as these might be sold out from under the lessee.

The Public Sector retirees are worried that their pension disbursements will be delayed or withheld completely, having been seized as payment for Illinois' existing past-due debts. Since the state pension plans are woefully underfunded (in some cases at 20% or less), it's a possibility the plans will no longer exist.

The 32% rate increase on 'working' people wouldn't be enough to support the existing pension outlays with no real benefits beyond that. It's just Chicago/Springfield (D) kicking the can down the road again.
Posted by: Mullah Richard   2017-07-03 11:30  

#11  It will pass and become law. The governor's veto will be overriden. Any future recovery due to tax increases will likely be offset by business and private departures from the state. Raising taxes is never the answer. Wen the bond ratings and borrowing ability went south, so did and chance for their financial survival. It's been coming along for decades, this should be interesting to watch.
Posted by: Besoeker   2017-07-03 10:18  

#10  late on Sunday evening the Illinois House approved the most controversial element of a budget package, a tax hike which will increase the income tax rate by 32% from 3.75% to 4.95%, and the corporate income tax rate from 5.25% to 7%, to try and end a historic budget impasse.

Should this pass and become law, any guesses on how long it will take to return to the same financial state they are in now?
Posted by: JohnQC   2017-07-03 09:45  

#9  Well to be honest, the only the demoncrats know how to do it raise taxes. They are the scorpion.
Posted by: DarthVader   2017-07-03 08:29  

#8  No state constitutional amendment to cap pensions?

Not even on a good day, P2k. The 'pensioners' (existing and potential) have had a firm grip on both sides of the aisle in Springfield for decades.
Posted by: Mullah Richard   2017-07-03 07:40  

#7  No state constitutional amendment to cap pensions? When you go TU, it'll happen anyway. Just no courage to do it yourself. You don't deserve self rule if you are depending/expecting others to do your job. In the end its Unions vs the People. No way around it. In the end there can be only one.
Posted by: Procopius2k   2017-07-03 07:22  

#6  A little further upstream on the Wabash, take a ride on the Cannonball Bridge connecting St. Francisville, IL and Vincennes, IN. It was built in 1906 for the 'Big Four Railroad.' The center section rotated on big gears to allow the passage of steam boats. Closed in the late 1960's and bought by a local farmer, it was reopened with a toll of $1.00.
Posted by: Besoeker   2017-07-03 06:48  

#5  Highlighting downstate neglect:

The bridge over the Wabash connecting Illinois Route 14 and Indiana Route 66 at New Harmony was completed without federal funds in 1932. At it's opening, a bridge toll of $ .05 was charged due to 'bad times in the economy.' The toll was to be lifted when 'things got better.' The bridge was condemned and closed a few years ago. The toll at closure was $1.00. Evidently things....'never got better.'
Posted by: Besoeker   2017-07-03 06:18  

#4  Only if it holds hands with California on that poster, Besoeker.
Posted by: g(r)omgoru   2017-07-03 06:01  

#3  Business, industry, and wage earners have been leaving Illinois for more than 50 years. The corrupt Democratic machines and politicians in Chicago, Peoria, and a few of the other larger cities are responsible. Fiscal conservatism is the answer, not more taxes.

Illinois is a poster child for what ails the nation.
Posted by: Besoeker   2017-07-03 05:53  

#2  Let's be honest. Illinios problems stem from primarily from being the host to that parrasite called Chicago
Posted by: Cheaderhead   2017-07-03 05:50  

#1  ...A massive tax hike that will do nothing but insure people have to leave Illinois to look for work, because their employers will have been run out of the state.

Dear God, what is it with the Democrats? Even a flatworm knows to turn away from pain, but these people just seem intent on inflicting more and more upon themselves.

Mike
Posted by: Mike Kozlowski   2017-07-03 05:21  

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