Illinois Legislators Approve 66% Tax Increase

With only hours left before new state lawmakers were to take over, Illinois’s State Legislature narrowly approved early on Wednesday an increase of about 66 percent in the state’s income tax rate.

The vast size of the increase, the rarity of such increases here ”” the last one came two decades ago ”” and the hour of the vote (in the wee hours of Wednesday) all reflected the urgency and depth of this state’s fiscal crisis.

Even grudging supporters of the tax increase, which won no Republican support in a state capital controlled by Democrats, voiced a desperate sense of regret over the circumstances in which Illinois finds itself. State Representative Elaine Nekritz, a Democrat who voted for the increase, described her decision as an alternative “between bad and worse.” Another Democrat cautioned his colleagues: “We don’t have a better choice today.”

Read it all.


Posted in * Economics, Politics, Economy, Politics in General, State Government, Taxes, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--

23 comments on “Illinois Legislators Approve 66% Tax Increase

  1. BrianInDioSpfd says:

    A desperate measure, which will likely prolong the recession in Illinois, passed before the size of the Democrat majority was reduced at noon today. This afternoon with the new legislature, it would have had no hope of passing. 🙁

  2. Statmann says:

    The Democrats said they had NO other choice. How could anyone doubt them? Illinois is the Land Of Honest Abe. (Buy moving van company stock!) Statmann

  3. lostdesert says:

    Coming to as State near you, California $19,000,000,000 in debt, Massachusetts $2,000,000,000 in debt, New Jersey and others. All losing residents. Mass just lost a congressional seat. Blessedly any of following will be gone in 2 years:

    Barney Frank (I can ruin the economy and be a sexual predator and never go to jail);

    Jim McGovern (my arm sweetly around Fidel Castro, I never met a Communist I didn’t like);

    Richard Neal (I don’t do or say anything but just vote Dem and these idiots re-elect me anyway), and

    John Tierney (my wife was just convicted of laundering $7,000,000 off shore, was fined $2,500 and she wasn’t given ANY jail time).

    Or others – unbelievable.

  4. dwstroudmd+ says:

    Preview of the Obama plan and Democratic plan for the entire country.

  5. robroy says:

    The really sad thing about the legislators is that they probably think that a 66% increase in tax rates translates into a 66% increase in tax [i]revenues[/i]. I wonder what the actual increase in tax revenues will be?

  6. lostdesert says:

    Rahm Emanuel is going to restore honesty and integrity to Illinois politics. Stop laughing, that’s rude.

  7. midwestnorwegian says:

    Conservative states – brace yourselves for a large migration of liberals exiting Illinois and coming to your state with their sickness.

  8. upnorfjoel says:

    The revenue realized will be much lower Robroy (#5) and maybe net-zero or worse. The rate of businesses exiting Illinois will be increasing under the new business taxes in this legislation, which are actually a much larger hit than on individuals.
    Less business = less jobs = less revenue. Brilliant!

  9. robroy says:

    upnorfjoel, I was wondering myself if the net revenue increase will actually be negative. There is someone who is happy about the increase: url= ]One Person Excited About the 75% Tax Increase in Illinois… Indiana Governor Mitch Daniels[/url]

  10. robroy says:

    Try that link again: [url= ]One Person Excited About the 75% Tax Increase in Illinois… Indiana Governor Mitch Daniels[/url]

  11. robroy says:

    Saw this quote by an Illinois state legislator:
    [blockquote] “So here we are in the very end of this lame duck session on a late night putting more burden on the hardworking people of this state,” said Sen. Kyle McCarter, R-Lebanon. “Here’s an investment tip, put a lot of money into moving vans.” [/blockquote]
    And this tidbit:
    [blockquote] Senators also gave final approval to a House passed plan that would allow the state to [b]borrow[/b] nearly $4 billion to make its annual payment for public employee pensions. The House approved the plan last year.[/blockquote]

  12. Cennydd13 says:

    An increase like this one would go over in California like a lead balloon, but I wouldn’t bet on Jerry (whom some of us still call ‘Gov. Moonbeam’) Brown not trying to make it happen. We’re $125 billion in the red, and he’s got to do [i] something.[/i]

  13. lostdesert says:

    Wow, cennydd13, thought CA was $9,000,000,000 in debt. How did I get that so wrong? MA is 2nd most indebted state on per capita basis. Gov mini-me Deval Patrick can’t wait to implement a graduated income tax. He is also trying to give in-state tuition to illegals. Already have Cambridge as sanctuary city, isn’t that treason?

    They are running out the door, not only of TEC, but also of Massachusetts, hmmmmmm, why is that? Maybe MA can lose another congressional seat next census. I predict yes.

  14. Robert Dedmon says:

    In our average family this increase will amount to an additional $1,400 each year in state income tax. We will not balance our
    home budget by reducing our tithe to the church, but there will be no further charitable contributions in 2011. This measure was passed by a lameduck legislature in is final hours, and will be signed by a governor who was elected in November by .2% of the popular vote and then claimed a “mandate” for this income tax increase.
    There is no honor in Springfield.
    Yours from the Peoples’ Republic of Illinois, where gas has reached
    $3.30 in sunny Peoria.

  15. KevinBabb says:

    The state of Illinois has already lost $250,000 of the tax increase, since our Socialist governor had to agree to put that much more State money into the Chicago Public Schools in order to buy the “yes” votes of a bloc of Chicago legislators.
    Yesterday, the St. Louis radio stations featured various Missouri politicians who were discussing how their State could/would benefit from the Illinois tax increase.
    The Illinois Republican Party has a tradition, going back to Charles Percy and Jim Thompson, of being fairly moderate (In the November election, we elected a Republican Senator, because conservative downstate Republicans would vote for a moderate Republican. The Republican candidate for governor lost because moderate Republicans in the Chicago suburbs would not vote for a conservative Republican.). It took a pass on the ideological revolution in the Party that started with Goldwater, and was consummated by Reagan. Perhaps that moderation is a mistake. Perhaps this tax increase will change that history.

  16. John Wilkins says:

    We’ll see what happens. The article doesn’t say very much: who is paying the taxes? Is it actually a corporate tax? Or is it individuals? We don’t know.

    Local restaurants and delis will not move out. The tax burden will probably fall on the wealthy, but as they put most of their money in savings, they won’t notice it. A few might move out, but they would lose value on their homes.

    Demand, however, will shift, and some businesses will move. Others will stay. But if Illinois does recover faster, then it will be a success.

  17. tgd says:

    So the state’s personal income tax rate has gone up to 5% — that is still a low state income tax rate.

  18. KevinBabb says:

    One aspect of this that has gone un-discussed is the way that this affects federal tax revenues, due to the deductibility of state and local taxes on the federal return. By increasing the amount of Illinois income taxes, the State Legislature has increased the gross amount of deductions taken by Illinois taxpayers on their federal returns, thereby decreasing net federal tax revenues from Illinois taxpayers. Of course, at the higher income levels, this effect is mitigated somewhat by the federal “claw-back” of itemized deductions.
    An interesting aspect of the Illinois Constitution that reduces the ability/willingness of the Legislature to raise the income tax is the Constitutional provision that the state income tax must be a “flat tax”–the so-called “progressive” (or “soak the rich”) method is prohibited. This was part of the political compromise surrounding the introduction of the state income tax in the early 1970s. So, the 2% is levied on people making the minimum wage, as well as at higher wage levels.
    The governor who first brought in the income tax was Dick Ogilvie, a decorated war hero, and very popular Republican (the last Republican to be elected Sheriff of the county in which Chicago was located). He was in every way a satisfactory governor, but his support of the state income tax was enough to return him to his senior partnership at the tony Chicago law firm of Isham, (Robert) Lincoln & Beale.

    Hopefully this move will have the same salutory effect of returning Pat Quinn to the private sector, although his resume is not nearly as strong as was Ogilivie’s.

  19. KevinBabb says:

    tgd–“low” compared to what? From 1818 to 1971, our state income tax rate was 0%.

    A very pro-government editorial today in the St. Louis Post-Dispatch pointed out that the total tax change for Illinois taxpayers will be neutral for the next year, since the 2% income tax increase tracks the 2% suspension of the payroll tax assessment.

  20. lostdesert says:

    tgd – Low? Really? What would prompt one to make such a remark. I am guessing you are not an employer. Consider what taxes do to business, especially small businesses, the ones who will be most burdened.

    How many who work in the govt, state or federal, have ever created a job? ……………. crickets.

  21. robroy says:

    Tgd is actually correct. I was looking at Kipling’s website and 5% is in the middle of the states. Hawaii and Oregon were at the top with 11%. Also they looked at all the taxes (property, sales, etc) and Indiana was one of the worst five for retirees.

  22. lostdesert says:

    Low ….. compared to other socialist states. Not low enough for me.

  23. robroy says:

    Have this from the tax prof blog, though:
    [blockquote]Small businesses will pay the new 5% income tax rate, up from 3%, and the effective corporate tax rate will rise to 9.5%, which, when combined with the federal rate of 35%, will make the Land of Lincoln one of the most expensive places in the world to conduct business. [/blockquote]