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National Editorial & Columnists

ILLINOIS SCOOP: After tax hike, the real pain has just begun

Shrinking tax base will pinch the rest of us

Austin Berg
Austin Berg

The infamous budget impasse is over. But rather than rejoice, Illinoisans should recoil.

The pain that washed over Illinois’ most vulnerable residents as the state stiffed service providers for more than 2 years won’t recede for long. High tide will come again. And the levees are still busted.

First, take the tax hikes.

The state will eat a 32 percent larger chunk out of most workers’ paychecks, retroactive to July 1. Many of the businesses that employ those workers will begin paying one of the highest corporate income tax rates in the nation.

Totally lost in Springfield’s rush to raise taxes was the disturbing reality that Illinois’ tax base is shrinking. Data from the state’s Commission on Government Forecasting and Accountability show tax revenues are down from this time last year.

When tax dollars are declining even when the tax rate stays the same, that’s a sure signal the state’s economy is in bad shape. Those who say late payments from the state are behind Illinois’ Great Depression-era growth are clueless or telling fairy tales.

The state’s economy was flailing before the impasse. It’s still flailing. Illinoisans have seen the worst income growth in the nation in the recession era, at 0.8 percent per year. The income tax hike wipes out nearly an entire year’s worth of that tepid growth.

This budget makes Illinois’ economic sickness only worse. Rehabilitative reforms are nowhere to be seen. There is only a cash grab.

But, of course, Illinoisans were told the budget deal was about more than just taxes.

This budget was about ensuring residents with autism get the services they need. This budget was about protecting residents suffering under domestic abuse. This budget was about assisting residents who need a hand up to attend college.

But this budget provides no real security to any of those groups.

That’s because it does not fix the state’s priority problem. Illinoisans who can now rely on the programs punted into peril during the impasse are still at the bottom of the totem poll. The next time the state grinds to a halt, they will again be left out in the cold.

Consider the state’s key spending categories from 2000 to 2015. Total state revenues over this time increased a healthy 57 percent. Spending on culture and the environment decreased 59 percent. Excluding pensions, spending on higher education decreased 8 percent. Spending on human services increased 10 percent. Spending on public safety increased 12 percent. Spending on K-12 education increased 35 percent, excluding pensions.

On the other hand, spending on Medicaid increased 141 percent. Spending on state-employee insurance increased 166 percent. And spending on state-employee pension benefits increased 586 percent.

Ask your lawmaker what this tax-hike budget did to address these warped priorities. The answer is nothing.

Illinoisans know from experience that these priorities cripple the state. They’re the reason the 2011 tax hikes were an utter failure. Taxes went up. Debt exploded. The credit rating dipped. And those in need of state assistance were no better off.

But forget about state services. And forget about taxes. This budget was all about avoiding a “junk” credit rating.

Republicans who sided with House Speaker Mike Madigan to pass this budget seemed especially concerned with this distinction, trumpeting in the media and on the House floor that their vote to hike taxes would save the state from becoming junk.

But this budget doesn’t save the state from junk. A ratings agency even said as much.

All that revenue wouldn’t be enough to mask the “further deterioration” of Illinois’ unpaid bills and pension crisis, according to Moody’s Investors Service.

So what will Illinoisans get in return for their compulsory new investment in state government?

A tanking economy, a credit rating on its way to junk, and a system that refuses to put people in need at the front of the line.

In Springfield, that’s called compromise.

Note to readers: Austin Berg is a writer for the Illinois Policy Institute. He wrote this column for the Illinois News Network, a project of the Institute. Berg can be reached at aberg@illinoispolicy.org.

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