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Higher taxes will again prove futile in resolving state fiscal crisis

The League of Women Voters in a recent op-ed demanded passage of the proposed increase in Illinois income taxes by over $5B annually; broadening the sales tax to include services; the LWV conventioneers didn’t agree with freezing local property taxes but were in favor of levying a state income tax on senior’s retirement income.

The Civic Committee of the Commercial Club of Chicago also envisions raising individual and corporate tax rates and extending the individual income tax to retirement income, just as Illinois Senate President Cullerton, who concluded that the state could collect $1.6B a year if retirement income was taxed at 5%.

Of course, these business men want to see the elimination of multimillion dollar inheritances and a reduction in worker’s compensation for employers. No surprise that their proposal eliminates some of their costs to a degree but fails to mention property taxes for the homeowners or the additional burdens of seniors taxed on fixed incomes.

Illinois currently ranks in the top three of 50 states when state and local tax burdens are combined and the number one state in the U.S. in median property taxes.

Recalling Illinois’ past record, what makes these “self-proclaimed experts” trust that Springfield will do anything differently than they did when the 5% income tax rate was in effect from 2011 to 2014, with $31.6B in additional tax revenue collected?

The debt was lowered, but by only $1.3B, while the remaining revenue disappeared into additional programs and the debt only got worse. The exorbitant government pension debts rose by $25B from 2010 to 2015 with lost interest on the $130B pension debt at 7%, costing the pension plans $9.1B annually or $25M per day.

Previous tax increases, without structural tax and spending reform, have been proven not to reduce Illinois’ financial crisis and never will with our current legislative leaders.

The state’s public pensions are currently funded at only 38% while pension debt continues to increase and the “proponents of more state revenue” must now rely on fixed private pensioners to bail-out these “out of control” public pensions that include 3% annual increases, unlike most fixed private pensions.

One thing did shrink, however, from July 2013 to July 2016 – 78,000 people left the state, while the neighboring states and most states in the country grew in population.

Illinois’ pension debt has more than tripled since 2002 via legislative mismanagement to remain in powerful leadership positions. Yearly pension costs now consume 25 percent of the state’s general fund budget.

Over 64% of Illinoisans surveyed disagree with proponents of a tax hike and 76% do not favor sales tax increases as part of the state budget, according to a survey commissioned by the Illinois Policy Institute.

It’s also absurd for Illinoisans to have to pay more than $5 billion in new taxes just to exchange their property taxes, which will be frozen at highest median level in the nation. Since 1990, residential property taxes have grown 3.3 times faster than the state’s median household income.

Many Illinois property owners don’t even know that the proposed Senate property tax freeze bill has exceptions for costs related to debt service, pension payments and public safety – some of the biggest cost drivers of property taxes … some freeze.

Besides, property taxes in Rockford have effectively been frozen by the local taxing districts for the past five or six years. There is no gain with a state property tax freeze in our area in exchange for a $5B tax increase?

Median property taxes in Illinois are not only the highest in the U.S. as a percentage of the property’s Fair Market Value but are double the national average with many homeowners paying more in property taxes than they do for their mortgages.

The Illinois Municipal League, an association of local governments, believes that a freeze on property taxes is another unfunded state mandate because they believe that it’s their money, to pay for administrative salaries, wage increase and pensions for their public employees, regardless of the lack of wage increases and pensions in the private sector.

The result will be more residents leaving the state and the further loss of jobs to neighboring states because taxpayers cannot be an endless source of revenue for Illinois’ out of control government spending.

Proponents of the tax increases protest that state government was not elected to harm or deprive various social services. Conversely, the same state government was not elected to bankrupt its citizens nor private retirees on fixed incomes for the greater good of government programs.

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2 Comments

  1. Ted,

    Well crafted position. There was at one time a similar problem, albeit on a smaller scale, in Harborside where Tony and Marge live. The HOA decided to implement a Tax District for the purpose of having the County levy an additional 20% tax on the property owner’s PP tax bill to recoup part of the losses in annual regime fees ($300/annum)rather than the Board filing lis pendium liens on the property owners in question. That move by the Board as well as the County was a direct violation and misuse of the South Carolina tax district language. I fought it for years as the first President of the Association because the annual yo-yo between $40 and $60/year affected my mortgage payments, resulting in having to pay more than $300/annum. Small yes, but nevertheless carrying a dead-beat. It finally ended 2 years ago after the State told County to cease for that reason as well as our HOA not being listed as a tax district by the State which is required by law.

    We took some rather hefty annual regime fee losses ever year due to non-collections. Of course what you pen is a bit different, but it caused a number of Harborside residents to move to other locations and lots sold a pennies on the dollar wherein someone could get an almost free lot and build a home well below those listed on the market.

    In the Ill. cases, the mass migration of state and county residents places a terrible burden on existing County resident tax payers as well as State as a whole. It won’t get better. In fact, home sale prices will suffer because sale prices and lots will draw pennies on the dollar. We live in a difficult time and until the States and Governments wise up, parts of our country will go into foreclosure. Some will gain by that, but the socioeconomic fabric as a whole will dwindle year by year. Have a safe Independence Day. Jim

    • Ted Biondo

      Thanks for the comment, Jim. The home prices have decreased in our area by almost 30% in the last five or six years. They have started to level off but the tax assessor raised our prices by 36% in one year because the law allowed him to do it in the quadrennial year.

      I wrote about that also in an op-ed. He raised 9000 taxpayers home values last year and he was almost defeated when he ran for the office. He won by only 4% when he was used to winning by over 20% and was unopposed most of the time. Might be the last time he tries to do that again.

      I’m trying to email my op-ed to two of my friends as state representatives and to one Senator I have supported for 20 years and governor Rauner. We will see if the state goes bankrupt or raises our taxes by 5% on retirement income, which will force us to eventually leave the state when my county board term ends in 2018!

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