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Balancing the state budget without a tax hike

By Kristina Rasmussen

April 15th has come and gone, but Illinoisans need to be perpetually vigilant about taxes—especially when our state leaders are constantly thinking up ways to increase them.

One year ago, Governor Pat Quinn was pushing a 50 percent income tax increase. The state hadn’t adjusted its spending to meet the revenue realities of a recession, and the governor’s solution was to demand that hardworking families and businesses send more to state coffers.

Quinn’s 2009 push ultimately failed. Every Republican legislator in the House and Senate said “no” higher taxes, and to their credit, many Democrats did as well. They picked up on the public’s growing frustration with government spending beyond its means.

Some commentators continue to insist we need a massive tax hike to balance our state budget. They’re wrong. You can balance the budget without revenue increases or new borrowing. To prove it, the Illinois Policy Institute put together Budget Solutions 2011, a line-by-line alternative budget, available at IllinoisPolicy.org.

By focusing on spending realignments, right-sizing government labor costs, and pension funding reform, we came up with a sustainable path to fixing our state’s mounting budget woes.

Cutting spending isn’t easy. It never is. That’s why our budget’s spending decisions were based on four principles: setting priorities, spending fairness, transparency and accountability, and last in/first out.

With this approach, we were able to fund core services and even increase funding for certain programs, like general state aid for K-12 education, MAP grants for college students, and the Statewide Sexual Assault Evidence Collection Program.

Struggling families and businesses tighten their belts during tough economic times. We should demand no less of the state government. Getting government spending under control is the right thing to do.

Yet Governor Quinn insists on doing the wrong thing. This year, he is pushing what he’s calling a “one percent income tax surcharge.” This is slick marketing. What he’s actually talking about a permanent, 33-percent tax rate increase.

How would this affect your family? If your household has taxable income of $50,000, Governor Quinn wants you to write out an additional $500 check—payable to the State of Illinois—on top of the $1,500 you’re already contributing in state income taxes.

We should not balance the state budget by unbalancing the “kitchen table” budget.

Plus, there’s no good reason to believe that spending reform would follow a tax hike. For years the taxpayers provided Illinois government with record revenues. State leaders spent every dime and borrowed billions more. Illinois’s debt per capita has risen from $676 in 2001 to $1,682 in 2010.

Illinoisans already spend on average 101 days—January 1 through April 11—working to pay our combined tax burden, according to the nonpartisan Tax Foundation. Illinois ranks 14th highest in the number of days spent working each year to pay our federal, state, and local taxes.

The fundamental problem in Illinois state government is a lack of spending discipline. In 1998, state spending per resident was $3,500 (inflation adjusted), while ten years later state spending per resident was $4,600. State debt and tough economic conditions now make high levels of spending unsustainable.

Besides, if we could truly tax, spend, and borrow our way into prosperity, Illinois would already be a job creation powerhouse. Thousands of Americans would be pouring into our borders instead of heading to low-tax, high-growth states like Texas, Arizona, and Florida.

Distressingly, Illinois had a net out migration of 637,979 people from 1999-2008, putting us 48th in the nation for attracting newcomers to call Illinois home.

Hiking taxes will kill jobs—something that Illinois can ill afford to do right now with an unemployment rate above 11 percent. We already rank 48th for economic performance and 47th for economic outlook according to the ALEC/Laffer State Competitiveness Index. We can’t afford to go any lower.

We need new jobs, new ideas, and new people. Governor Quinn’s new taxes will chase away jobs, ideas, and people.

Illinoisans stopped Quinn’s tax hike last year. We must do so again this year.

Kristina Rasmussen is executive vice president with the Illinois Policy Institute, a nonpartisan research organization focused on advancing liberty-based public policy in Illinois.

 

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