Illinois has raised personal income taxes to 5% and corporate income taxes to 9.5%
Less than 12 hours before the new state legislature met in Springfield, a lame duck session of the now defunct 96th Illinois General Assembly passed hikes on taxes for both individuals and corporations. The personal tax rate was raised to a flat 5% and the corporate rate to 9.5%. The base rate has been raised to 7%, but Illinois businesses were already subject to another flat surcharge of 2.5%. These hikes, which are supposedly temporary, are supposed to fill a massive budget shortfall for the 2011 fiscal year. Governor Pat Quinn has promised to quickly sign the tax hikes into law.
Whatever the motivation behind these recent hikes, it has made several of Illinois’ neighbors very, very happy.
In an interview on the Chicago-based WLS 890 AM Indiana Governor Mitch Daniels tore into the poor decisions to raise taxes during a recession. “Oh you guys are nothing if not entertaining over there. It’s like living next door to ‘The Simpsons’: you know the dysfunctional family down the block.”
Wisconsin Governor Scott Walker released a slightly more formal statement. “Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, ‘Escape to Wisconsin’… Today we renew that call to Illinois businesses, ‘Escape to Wisconsin.’ You are welcome here.” Until the tax hike was passed, it was potentially more expensive to have a corporation in Wisconsin.
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Some perspective from the Chicago Tribune:
“Despite such resistance to tax hikes, many experts do not regard Illinois as a particularly high-tax state for individual taxpayers. In 2008, the nonpartisan Tax Foundation, a Washington-based think tank, ranked Illinois 30th among all states when it came to the combined burden of state and local taxes, including property taxes.
Neighboring Wisconsin had the ninth highest per-capita tax burden among states, while Indiana came in 28th, the foundation concluded. First and worst in the nation was New Jersey, according to the group’s rankings.”
Thus remember that Wisconsin and Indiana are in a public relations war with Illinois.
Furthermore, I believe the municipal budget crisis is not based on political leadership, as states like Texas (historically strong conservative government running things) also have massive budget gaps to fix and will also eventually raise taxes.
In actuality, I believe that tax cuts through history were not backed up by spending cuts (that would have made them less-popular and those who enacted them like Reagan, very unpopular). Thus we have been on this road for some time.