Illinois: an example of what not to do

October 5, 2020

Illinois: An Example of What Not to Do

Iowa's tax code isn't perfect, but important steps have been taken in recent years to make it better. Iowa's budget ended FY 2020 with a $305 million surplus and the state's cash reserves are strong.

We don't have to look too far to see an alternative view. Bureaucrats in Illinois want to increase taxes in an attempt to fix their broken budget.

Illinois voters will vote November 3 on whether to approve or reject changes to the state's tax structure. The changes are not good. Currently, Illinois has a 4.5 percent flat income tax. Tax hungry big spenders want to change to a progressive income tax with no limits to the rate increases.

Not everyone supports Illinois's proposed tax changes — bankers, business owners, and business organizations say it will hurt job creation and the economy.

Massive tax hikes are also on the ballot in California, Arizona, and Arkansas. The Governor of New Jersey has proposed new taxes thinking they will fix financial challenges.

To paraphrase our friends at Goldwater Institute, at a time when over 100,000 small businesses have permanently closed across the nation and Americans are looking to emerge from the economic devastation of COVID-19, tax increases on job creators are the last thing we need.

The moment Iowans cease trying to improve our tax code, the door will be left open for wild and expensive ideas from Illinois, California, and New Jersey to take root.

Iowa Taxpayers Shouldn’t Have to Subsidize
Other State’s Irresponsible Spending

Many emergency COVID-19 stimulus plans are floating around Congress, all of which propose the disbursement of massive sums of taxpayer dollars. State and local governments should not be handed a blank check to cover their previous indiscretions.

Taxpayers across the country have already contributed over $260 billion in direct federal aid to state budgets and hundreds of billions more in indirect aid and lending capacity.

Many of the states begging for more aid were spending recklessly for years before coronavirus hit the U.S., not to mention the new spending programs they concocted since the pandemic began.

Iowans should be proud of the fact that our state was in such a strong financial position when the pandemic hit this spring, following years of fiscal discipline and responsible budgeting.

At a time when we have already felt the impact of the coronavirus in so many ways, not to mention a drought and derecho, we don't need Washington, D.C., dipping into our pockets to subsidize reckless spending elsewhere.

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This Isn't How it Works

Des Moines wants to increase the city's tax base by eliminating taxes on certain types of property.

Just as with tax credits, this shifts the tax burden to a smaller group of taxpayers and allows bureaucrats to choose winners and losers by handing out exemptions to some while turning up rates on others.

The ideal tax policy should:

Lower rates for everyone; and
Broaden the base

Playing games with abatements, credits, and other incentives, and then claiming it will increase future revenue, does not guarantee anything except a larger bill for some unlucky taxpayers. A well-structured and predictable tax system with low rates for everyone is a better incentive for economic and neighborhood growth.

Links of Interest

The Trump-Biden stakes: your life savings. Skeptics argue that the market’s performance matters only to investors with the biggest stakes, but that argument gets things backward. Younger Americans, just beginning to save in an IRA or 401(k), have an even greater interest in pro-growth economic policies. They have more years to reap the benefits. - Grover Norquist, Wall Street Journal

Time for those income tax rate reductions? Taxpayers over-funded state government by $300 million and has over $700 in cash reserves. - DM Register, CR Gazette

Iowa’s Business Conditions Index bounced well above growth neutral for September, climbing to 67.1, a healthy jump from 56.4 in August. - Radio Iowa

How would Amy Coney Barrett rule on taxpayer cases? The last thing the IRS may want on the Supreme Court is a stickler who will hold them accountable for their unwritten rules and unclear directives to taxpayers. - National Taxpayers Union

IRS Data: Americans with incomes between $50,000 and $100,000 saw their tax liability drop by an average of 13 percent. - Americans for Tax Reform

"Nearly every government regulation comes at some price to individual liberty. Determining whether a government regulation truly serves the public interest, therefore, requires determining whether the price is worth paying."
- Judge Amy Coney Barrett