Reeder: Taxpayers feel pinch as state spends and spends
By Scott Reeder January 23, 2013 10:00PM
Updated: February 25, 2013 12:02PM
Is your wallet a little thinner these days?
More than likely, the state of Illinois is to blame.
About the same time the Legislature jacked up the income tax from 3 percent to 5 percent two years ago, the federal government gave us a temporary, 2-percentage-point break on how much we pay into Social Security.
That cut inadvertently softened the wallop of the state tax increase, but the relief from Washington expired Jan. 1 when the Social Security tax returned to its former level.
Now we get to experience the higher income tax in all of its glory, as the state sucks away what amounts to a week of our pay. And to what end?
The Deadbeat State is still broke, unable to pay all its bills. The pension systems are still floundering. Government employee unions’ hunger for more dollars remains as voracious as ever.
Illinois’ tax revenue has never been higher in the Land of Lincoln’s 190-year history. But our politicians are still crying poor.
Why? Because they are still spending money faster than they are taking it in.
Rather than curbing spending, they’re laying the groundwork for another tax hike. Advocates are calling it “progressive” tax reform.
Never mind that the Illinois Constitution prohibits a graduated income tax rate, where the more you earn, the more you pay. Proponents of such a tax are prepared to change the constitution.
Last week, state Rep. Naomi Jakobsson (D-Champaign) introduced a proposed constitutional amendment to do just that.
The underlying reason for the proposed switch is a desire for the state to collect more money.
You’ll hear some malarkey that a graduated income tax only will make the “rich” pay more. To see just how wrong that thinking is, look to our neighbor to the west, Iowa.
Over in the Tall Corn State, the top income tax rate is 8.98 percent. And the people who paid that rate in 2012 earned $66,105 or more.
Does anybody think that a family living on $66,000 is rich?
And yes, I’m aware that the Illinois Legislature could choose a different income level than Iowa to start taxing at the top rate. But 31 of the 34 states that have a graduated income-tax structure set $50,000 at a higher marginal rate than Illinois will in 2015.
The question remains: Why increase taxes at all when state tax income is at an all-time high?
“I don’t support a (graduated) tax because we already have enough money coming in,” Rep. David Harris (R-Arlington Heights) said. “We need to look at spending … and the place to start is pensions.”
For decades, our legislators have refused to institute comprehensive pension reform and have failed to fully provide the state share of pension payments — a combination that has created that $96 billion long-term funding liability you’ve heard so much about.
And that bottomless pension pit means that the state keeps dumping more money into its failing pension systems, leaving less for other core services such as education and health care. Next year, for example, the state will allocate $6.8 billion toward its five pension funds, nearly $1 billion more than this year.
And that’s not all. The state continues to pay its vendor bills months late, harming social service agencies and businesses, and has a current debt of about $7 billion.
Our governor and Legislature seem unable to set priorities or make tough decisions. Why give them more money?
Illinois’ problem isn’t that it doesn’t have enough money, it’s that it’s spending too much.
And every working Illinoisan is feeling the pinch because of it.
Scott Reeder is a veteran statehouse reporter and the journalist-in-residence at the Illinois Policy Institute, a nonprofit research group that supports the free market and limited government.