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One Year After The Tax Hike In Illinoi

Adam Schuster, Illinois Policy Institute

The Annie Frey Show
July 05, 2018 - 4:09 pm

AF: Joining us right now is Adam Schuster from the Illinois policy Institute. Adam, thanks for joining us. We have experienced last summer we had a tax hike we have a 32% tax hike income tax hike on the Illinois taxpayers. Where are we right now that they taken all of this money to solve all of the problems from Illinois, they raise the taxes by 1/3 how many problems have been solved since then?

AS: Short answer is none. So, we're looking back a year, on an anniversary that's not worth celebrating, where it's the anniversary of lawmakers taking 5 billion dollars out of the pockets of hard-working taxpayers in Illinois and spending it on, you know continued overspending and they've done absolutely nothing to cut spending to make sure that in the long run that it's it's in line with what we can afford. They didn't use any of that five billion dollars to pay off our pension debts to pay off our backlog of bills. So, on top of all that on top of the fact that it's failed to do anything to to pay off your debts and prove your credit rating to balance their budgets. It's also harmed our economy.

AF: Yeah, I mean the shocking thing about these tax hikes is that they don't even address the problems that are really threatening the solvency of the state of Illinois and then we have we have on the ballot essentially in November the opportunity to vote for a progressive income tax in the likes of JB pritzker. I mean I was talking about this little bit earlier in the show. When government says the there's a problem there here to help. They always need you to pay for it first. And then they're going to tell you how you're going to solve it. And at the end if the problem is not solved. I'll just come back and ask you for more money. What is a progressive income tax? What's the implications of that on the Illinois taxpayer?

A: The progressive income tax is simply a trojan horse for more middle-class tax hikes. As soon as they've got the ability to play with the different rates and to play people against each other. It's giving them a blank check to hike taxes as much as they want. And the silver lining of the 2017 tax hike is that everybody should now have all of the evidence that they'll ever need the tax hikes won't solve our problem. When you look back over the last year, like I said, we couldn't balance the budget in either the first or the second year of the tax hike we didn't have a truly balanced budget or credit rating has not gone up at all how long term debts have not gone down at all. But we have seen is that our economy our we're not growing jobs at a slower rate than we were before the tax like so when you look cross the country the whole country has been growing since the recession since about 2010 we've been fully dinner ways out of this hole and the nation has maintained roughly a steady rate of jobs growth. And Illinois was growing pretty steadily and then right after the 2017 tax like we saw about a 34% dip and the rate at which were creating new jobs. Another way. You can see that it's hurt. The economy is the time that it takes for someone to find a job is going out to the amount of time that it takes somebody that was the amount of time somebody spends unemployed has gone up by about 2 weeks in Illinois since the tax hike while that rates maintains a steady rate in the in the nation overall though. It's actually what we're saying is that is not fixing our problems in the short-term. And because it's hurting our economy is hurting our ability to grow a revenue. Naturally. It's making these problems harder to self in the long term. And so what I say is the first step to getting out of any hole stop digging and progressive tax would be nothing but digging this down further in the whole world.

AF: for sure net tell me about how the state of Illinois compares to you know, the other states but specifically some of their red-state neighbors because it's not like if you're if you're in Illinois and you're under the the the pressures of this overbearing tax structure that you can't do something about it you can. You can leave and it only my case. I live in Illinois work in Missouri. Just earlier today. Tony was said why why even stay there? A lot of people have to ask themselves that question regularly. You know, what is it like being next to all these red States? How does Illinois compared?

AS: Yes, so every state other than Illinois has cut their personal income taxes since 2011 and is currently there's several of them are currently talking about cutting them even further. So their tax rates are all going down your all of our neighboring states to seeing decreasing tax burdens, Illinois hike taxes in 2011. It was supposed to be temporary. It didn't solve any of the problems and they said they need to make it permanent. So they hike them again in 2017. And now there's people talking about even further tax hike through the so-called progressive income tax and that's why we're not able to compete with our neighbors so In addition to being slower than the nation we're blow the regional average for jobs growth below our neighboring states for jobs growth. And we're the only state in the nation or will one of only two states that scene 4 years of declining population and make it worse. You know, some people might sell well that just lets people retiring and moving to Florida to get away from the weather and it's actually now with the data shows the data shows that the the place our population is declining most is among Prime working-age adults people who are you know in the middle of their career or trying to let you know, Buy a home start a family plan for their future and they're not doing it in Illinois.They're leaving the state because our our poor economy and our record of tax hikes is driving people out to look for greener pastures. Like you said,

AF: It is so frustrating anything anything that you can as in Illinois taxpayer listening right now that's equally frustrated about it. What can they do?

AS: We'll there are the two things that I would say the first is because the the budget they just passed so it's not really about it. It's a spending plan, but because it's unbalanced is a really good chance that in the middle of this year. So it middle the fiscal year, which should be  January. They'll come asking for more money. I'll come asking for another tax like the past the the unbalanced budget of a passed and we need to let them know that. Mac Haik you're absolutely off the table. We realize that it's never going to solve our problems because the core problemwe have in Illinois is overspending State spending has grown 25% faster than residents personal income. So instead of Taking taxes again to fix are overspending. What we need them to do is to adopt a constitutional spending cap Amendment. Which would tie the growth in state spending to the growth in the economy. So ties lawmakers ability to spend money is a taxpayer's ability to pay the bill and we need them to adopt that immediately the budgeting principle. And a long run we need them to put that on the ballot so we can vote on another Constitutional Amendment and that would tie their hands and force them to finally live with in our means.

AF: Is there a point of no return for the state of Illinois?

AS: Yeah, abosolutely. There's a point of no return for for anybody. We we seem to be operating under this idea that government is somehow different and government can overspend rack up that and get away with it. But we are really close to being downgraded to junk status for for a bonds last summer and I think if we don't do something soon to go after these structural cost drivers of this other state budget problems. There's a real chance we could be there again soon. So I think lawmakers need to get serious about it. Now, you know, the writing's on the wall. We we see that pensions are crowding out other core Services. We see the people are leaving the state and that's not one of the main reasons that they say they're leaving is because of tax hikes. The law makers need to get serious about solving these problems sooner rather than later.

AF: Who gets hurt first and who gets hurt the worst in the event of passing that point of no return.

AS:Well, I think I think you'll feed pretty broad-based. And I mean the problem is when tensions are crowding out. Services you see the layoffs. I mean, we just saw that we saw this in Harvey where they had to lay off about half of their police and firefighters current day to pay for pension for their there. They're getting rid of current services to pay for the promises of past politicians essentially and not only that but if these Pension funds going insolvent, there's no guarantee that the pensioners are going to receive the money. They were promised anyway, so I'll start talking about pension reform now, so we're not going to let you know askTaxpayers pay more so we're not going to cut core vital services. And so we're going to actually preserve the long-term retirement security of the people who were counting on those pensions because when they over-promise and if the funds go insolvent, that doesn't help anybody.

AF: Yeah, we are like in Red Alert. Right now and it's time to actually do something about it and certainly people will have the opportunity to do that. November Illinois policy Institute is a wonderful resource for a fiscal conservatism in the state of Illinois, Illinoispolicy.org, Adam Schuster, thanks so much for your time. We appreciate it.