Illinois: Death by Taxes

Dan Proft Jan. 16, 2011, 1:00am

During the Illinois General Assembly's lame duck session, Democrat leaders have moved to abolish the death penalty at the same time as signing the economic death warrant for state's economy.

In Illinois, it is law-abiding, working families who have been condemned.

Despite lllinois' leading exports being its residents and businesses, the General Assembly has proposed raising the state income and corporate income taxes by 75 percent each. If this tax monster passes, at least two things are certain: one, Illinois businesses would pay the highest corporate income taxes in the free world; two, Illinois would see the largest mass exodus of productive people since the Israelites fled Egypt.

The data points about Illinois' economic death spiral have been repeated so often as to have been stripped of their shock value. Bottom line: Illinois is a bigger default risk than Bernie Madoff and has created fewer jobs in the last decade than record stores.

Everyone sees that. Indiana Governor Mitch Daniels' told the Northwest Indiana Times, "We already had an edge on Illinois in terms of the cost of doing business, and this (IL tax increase) is going to make it significantly wider." 46 other U.S. governors could make the same claim as Daniels.

Even the Obama White House and the insatiable spendthrifts in Congress have begrudgingly acknowledged that raising structural taxes is the wrong policy choice if the policy goal is economic growth and job creation.

So why the massive tax hike? Do Mike Madigan, John Cullerton and Pat Quinn (listed in order of importance) really want to drive businesses and jobs from Illinois? Are they so dense that they understand not what they do?

Doubtful. How can individuals so good at political math be so inept at managing dollars and cents?

They are not. They simply have different priorities.

This tax hike is the cost of doing business in a down economy for Illinois' ruling class. Their business is political power not economic growth.

Their power derives from serving their tax-eater, rent-seeker coalition of public sector unions, crony capitalists and state dependents. And no price is too high for others to pay to ensure their coalition is served and their power retained.

The short-term revenue from the tax hike (although it will be less than anticipated) will allow them to pay some state vendors, moderately improve the state's credit rating so that they can commence more borrowing, and avoid any reckoning with the public sector unions.

If serving their constituency comes at the expense of some lost capital formation, business location and job creation in Illinois, well, that is just unfortunate collateral damage.

When comparing Indiana to Illinois, Gov. Daniels observed, "It does show that you can make very different choices and the contrast between the choice we've made and the one they (Illinois) have is stark. Obviously I think ours is wiser, but self-governance means people get what they vote for."

Just as it has for the past decade, Illinois is getting exactly what it voted for.

(Editor's note: Gov. Pat Quinn signed into law on Jan. 13 a bill that raises the individual income tax rate from 3 percent to 5 percent and raises the corporate income tax rate from 4.8 percent to 7 percent).

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