Last week Illinois passed legislation to significantly increase its income taxes in order to help solve its dismal budget deficit problems. Personal income tax rates in Illinois will go from 3 percent to 5 percent — a 66 percent (!) increase — for the next four years. Corporate taxes also will increase. Legislators passed the bill only hours before a new legislature was sworn in, and coupled the tax increases with a promise that, during the four-year period, spending increases would be limited to 2 percent a year. Given that Illinois has a $25 billion annual budget, the “strict limits on spending increases” means the Illinois legislature will have to scrimp by on only $500 million in new spending every year.
The actions of the Illinois legislature and Governor are precisely why “tea party” candidates were successful in the 2010 election and will be probably continue to be successful so long as government spending is out of control. It will always be easier for politicians to defer hard choices on spending, so as to avoid upsetting any constituency, and then seek tax increases imposed by lame-duck lawmakers who are leaving office and, perhaps, seeking jobs with the same constituencies who are trying to avoid spending reductions. I’m sure, however, that Illinois residents will appreciate the brave actions of their elected representatives and will be happy about paying even more taxes in a down economy where families have already engaged in significant belt-tightening.
I’m hoping that Governor Kasich and the Ohio General Assembly don’t follow the lead of the Illinois legislature. The path to a balanced budget lies in spending cuts, not tax increases imposed on struggling citizens and businesses that are expected to produce jobs. And if the Ohio government can resist the urge to raise taxes, it may find that Illinois residents and businesses may look favorably on Ohio as a more tax-friendly place where they can relocate and leave corrupt, spending-addicted Illinois politics behind.