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Thursday, February 28, 2008

How About A 66 Percent Tax Increase!

The Illinois State Senate, led by Emil Jones (D-Chicago) is going to try, once again, to advance a "tax swap"bill that would raise Illinois' income tax and corporate tax rates by 66%. The idea is that you raise income taxes from 3% to 5% and corporate taxes from 4.8% to 8%, then have the state distribute enough money from that raise to drop the education portion of property taxes by "at least 20%". (Story here in the Chicago Tribune)

I've done some basic math on this and what it comes out to, in my case, is the state trading me about a 400-500 dollar property tax rebate for a $1400 income tax increase! I'm thinking this isn't a fair "swap".

State legislative Republican's are right to be staying away from this like the plague. When enough people who've got basic math skills start figuring out that this is a huge tax increase, not a swap, the folks in Springfield won't want to be on supporting side of it.

Keep in mind also that hardest hit by this increase are going to be the lower middle class folks, and those making just enough to pay income taxes. Illinois has a constitionally mandated flat tax rate, so everyone who pays income taxes will see that 66% increase. Additionally, those at the bottom of the income scale are the least likely to own a home, and get any "rebate" on their property taxes. It's doubtful landlords are going to be decreasing rent based on the lower taxes, meaning those folks get the biggest hammer.

Gov. Blagojevich has vowed to veto any income tax increase, and shrewd politician that he is, I can't see him signing one this big in an election year. However, that won't keep the Democrats in the legislature from trying to get it to his desk.

The fact a bill like this is coming up in Springfield, in an election year, shows how entrenched many Democratic legislators are in their seats. No where except in a legislature that's totally isolated from reality (and opposition voters) would this type of stuff come up in an election year.

The other economic reality to this very bad plan is that huge tax increases at the beginning of what might be a recession has never fixed an economy. Just ask the folks in Michigan if they've been able to tax their way back to prosperity yet.

I think the GOP ought to let it pass, it will make for great campaign fodder come this fall, and might actually be the tipping point for getting rid of a lot of suburban Democrats in Springfield and bring some parity back to the legislature, and create the ability to have rational discussions about how to fix the State's educational funding.

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