Illinois residents should say no to progressive tax hike
By Ben VanMetre
Imagine a friend asked you to help him out of his financial problems. He had been living extravagantly for years, spending much more money than he earned at his job. But he promised he would change his ways, and asked you for a little cash to help pay down his mountain of debt and maxed-out credit cards.
You say, "OK, I'll help." You give him some money to help him climb out of his financial abyss.
Now, nearly three years later, his finances are still a mess. So what does he do? He comes to you and asks for more.
That's exactly what's happening in Illinois government.
Lawmakers made Illinois taxpayers pony up more of their hard-earned income by passing a record income tax increase in 2011. The politicians said the extra cash was absolutely necessary to pay down the state's backlog of bills, stabilize the state's pension crisis and strengthen Illinois' economy.
But Illinois lawmakers failed on all accounts. So what are they doing now? They're asking for even more of your money.
Here's how they want raise taxes again: by swapping out Illinois' constitutionally protected flat-rate income tax for a progressive tax that would increase tax rates on 85 percent of hardworking Illinoisans. And, thinking we won't catch on to their ploy, they're calling this tax hike "tax reform."
Progressive tax hike advocates are trying to paint the tax hikes as a solution to all of the state's financial issues. They're making the exact same promises about the state's unpaid bills, pensions and economy that they made during their sales pitch for the last tax hike.
Think back to your friend. If he asked you for more money, but gave no indication that he was going to change his ways, would you enable him? Of course not!
Illinois needs reform, not more revenue through higher taxes. The failures of the last tax hike are proof of that.
The 2011 tax hike has generated $18 billion in new tax money since it was passed.
But even with $18 billion in new revenue, Illinois still has a massive backlog of bills, ballooning pension debt and a crumbling economy. Politicians failed to keep their tax-hike promises.
Because of the 2011 state income tax hike, families and businesses have been forced to live with less. But politicians have not been held to those same standards.
Instead, they've squandered the new money away in political games and papered over the need for real reform.
Not only did lawmakers fail to pay down the unpaid bills, but the backlog actually grew.
In January 2011, the month the tax hike was passed, Illinois' unpaid bills totaled $8.5 billion. Nearly three years later, with record-high revenues on hand, Illinois is nearing $9 billion in the red. While the debt has fluctuated over the years, it has never been erased.
Despite dumping billions of the additional tax-hike revenue into the state's pension systems, Illinois' pension debt has also grown.
The state's official unfunded pension liabilities will grow to more than $100 billion during the current fiscal year, up from $83 billion in 2011. That's because politicians dumped money into the pension systems instead of fixing them. Giving politicians money through a progressive tax hike will allow them to do it again.
And the state's economy? Illinois has the nation's second-highest unemployment rate, with more than 600,000 Illinoisans looking for work.
The only thing the 2011 tax hike did was allow lawmakers to skirt meaningful reforms as the state's economy continued to crumble. Another increase in the state's income tax — even one masked as "tax reform" — is the last thing Illinois needs.
Lawmakers need to be held accountable and overhaul the way the state spends tax dollars. That doesn't mean aimlessly cutting the budget — it means modernizing the entire spending process to save money and improve outcomes.
The first step in this spending overhaul is to address Illinois' pension crisis. The state needs to swap out its outdated and unmanageable defined benefit pension system for one modeled after the 401(k)-style plans used by more than 85 percent of the private sector and by more than 17,000 state university workers.
It's often said that insanity is the act of doing the same thing over and over again and expecting different results. That's been Illinois' broken strategy for decades. Revamping broken policies of the past and selling those failures as solutions to today's financial problems will not fix Illinois. Say no to the progressive tax hike.
Ben VanMetre is the senior budget and tax policy analyst for the Illinois Policy Institute.