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Higher taxes only encourage higher spending

State leaders haven’t earned the right to take more in taxes

Published: Thursday, June 13, 2013 1:15 a.m. CDT
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Ben VanMetre

In 2011, Illinois lawmakers passed a “temporary” 67 percent income tax hike and promised to roll back the increase beginning in 2015.

At the time, Senate President John Cullerton, D-Chicago, said: “We have just come through the worst economic crisis in our lifetime … and we have not paid our bills. ... We’re going to have to spend less money then we have in the last two years. And it’s going to be tough. But we are going to have our bills paid.”

Lawmakers already broke their promise regarding how they were going to use the tax-hike money. They said the tax hike was designed to pay down the state’s unpaid bills and restore fiscal order. Instead, 80 cents of every 2012 tax-hike dollar went to pensions.

Now, they are setting up the fiscal year 2014 budget to break another tax-hike promise by ramping up spending instead of preparing for a sunset.

The Illinois General Assembly increased fiscal year 2014 spending to more than $35.4 billion, up approximately $2 billion from what was approved for the current fiscal year. Lawmakers also passed Medicaid expansion and failed to address the state’s unfunded pension liability, which increases $21 million a day.

A significant portion of the $7 billion tax hike is scheduled to sunset in January 2015 – the individual income tax rate will fall to 3.75 percent from 5 percent, and the corporate income tax rate will drop to 5.25 percent from 7 percent.

That means the state will have less revenue in 2015 than it does today. In fact, Illinois’ projected revenue for fiscal year 2015 is approximately $33.4 billion, or $2 billion less than the projected $35.4 for fiscal year 2014.

Lawmakers should have used the budget as an opportunity to make the cuts and reforms necessary to sunset the tax hike next year.

Instead, they intentionally ramped up spending.

Why?

Pushing rapidly growing state spending even higher this year sets the stage to make lowering the tax rate next year look like a political impossibility.

Cullerton is already using the increase in spending to apply pressure to make the tax hike permanent.

Last week, he said: “How are they going to make up for the $5 billion in reduction once the income tax goes down? I mean, I am just asking. That should be the discussion including the Democrats. Governor Edgar proved that you don’t have to lie. You can say that I think we should keep it at a certain rate.”

Closing out the next fiscal year with record spending simply gives lawmakers a few talking points on the “draconian” cuts they’d be forced to make without a little more revenue in the state’s coffers.

Higher taxes will end with only more broken promises and even bigger problems in Illinois. Lawmakers haven’t earned the right to take more taxpayer money. And the fiscal year 2014 budget is proof of that.

This is what failed leadership looks like. It’s time for change.

Note to readers – Ben VanMetre is senior budget and tax policy analyst for the Illinois Policy Institute, Chicago. His research focuses on state and local government spending, tax policy, entrepreneurship, and economic freedom.

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