income taxes

Illinois Governor Talks Taxes In Budget Address

Illinois Governor Bruce Rauner (R-Winnetka) gave his third budget speech on Wednesday, saying the following regarding taxes:

As for revenue, we’ve always said that we’d consider revenue if it comes with changes that create jobs and grow the economy.

The current Senate proposal calls for a permanent increase in the income tax rate but offers only a temporary property tax freeze in exchange. That’s just not fair to hard-working taxpayers across the state.

We need a permanent property tax freeze in Illinois, just like the one the House passed last month. Over time, as our economy grows and revenues expand, any increase in the income tax could be stepped down – dedicating future surpluses to taxpayers, not more government spending.

The current Senate proposal would expand the state’s sales tax to cover everyday services, and raise taxes on food and drugs. We’re open to a broader sales tax base to mirror neighboring states like Wisconsin, but let’s make sure it’s best for the people of Illinois, not for the lobbyists in Springfield. We cannot raise taxes on people’s groceries and medicine – just as we cannot tax people’s retirement incomes. We can find a way to balance the budget without hurting lower-income families and fixed-income seniors…

(Editor’s note: Bold added for emphasis)

In short, Governor Rauner appears to be open to raising the state income tax rate as long as a permanent property tax freeze is implemented. Furthermore, Rauner looks to be open to expanding the state sales tax to various services, but is against raising taxes on food, medicine, and retirement income.

You can read the entire budget address on the Illinois Government News Network website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Amended Illinois Tax Hike Plan To Hit Taxpayers, Businesses, And Employment?

Back on January 16 I published a post on Survival And Prosperity entitled “Illinois ‘Grand Bargain’ Legislation Includes 32 Percent Personal Income Tax Hike.” I started the piece with:

Illinois taxpayers may get hit with a significant income tax hike pretty soon…

Yesterday morning, I learned the potential “hit” could be a “combination of punches” directred at taxpayers, businesses, and employment.

From the Greg Hinz On Politics blog on the website of Crain’s Chicago Business:

There’s still no word on when lawmakers are going to vote on it, but an amended tax-hike plan has been introduced in the state capital.

It’s a doozy, with an even higher income tax, a limited service tax and a sort of minimum tax on business. But the soda pop levy is gone, as are a couple of those corporate loophole closings that business groups didn’t like…

The highlights:

The Individual income tax would go to 4.99 percent from the current 3.75 percent, and the corporate income tax to 7 percent from 5.25 percent. Combined, that would pull in about an additional $5 billion a year.

A new “business opportunity tax” ranging from a fee of $225 to $15,000 a year would be imposed, based on payroll. The intent is to make sure that all companies pay something, whether they are profitable or not. The state’s net on this is an estimated $750 million a year.

However, the research and development tax credit would be made permanent and the manufacturers purchase and graphics arts credits would be combined, as some businesses wanted.

A service tax—extension of the sales tax—would be imposed on certain items including repair and maintenance of personal property, use of amusement services including gyms, landscaping, laundry and dry-cleaning, and storage of personal goods such as cars and property. This would pull in a projected $400 million a year.

The telecom excise tax would be extended to cable and satellite services.

Both Radogno and Cullerton are said to have negotiated and support the above, pending action on the rest of the package…

Hinz does a good job summarizing the proposed expanded revenue grab. At this point, I want to go back to that bit about a new “business opportunity tax.” From the actual legislation for the so-called “Business Opportunity Tax Act”:

Section 1-10. Tax imposed.
(a) Beginning on July 1, 2017, a tax is hereby imposed upon each qualified business for the privilege of doing business in the State.
(b) The tax under subsection (a) shall be imposed in the following amounts:
(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then then annual tax is $225;
(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then the annual tax is $750;
(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then the annual tax is $3,750;
(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then the annual tax is $7,500; and
(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax is $15,000…

I can see a number of existing and prospective Illinois business owners having concerns with the proposed “Business Opportunity Tax Act.”

First, Illinois already has poor business reputation. For example, early last year Chief Executive magazine asked 513 CEOs to rank states they are familiar with on the friendliness of their tax and regulatory regime, workforce quality, and living environment. The “Land of Lincoln” came in as the 48th worst state in this annual survey, beaten only by New York and California in that order. The “Business Opportunity Tax Act” has the real potential of increasing the perception that Illinois is business-unfriendly.

Second, if my understanding of the legislation is correct, the larger the payroll an Illinois business has, the more taxes they will pay. Consider the following. If I’m an Illinois business owner with a payroll just shy of $250K who would like to bring on more staff, I may be dissuaded from doing so to avoid forking over an additional $3,000 to the state (unless I’m convinced the hiring would offset the $3K hit). And how might employee raises be impacted once payrolls start approaching a higher tax bracket? The proposed “Business Opportunity Tax Act” may not be too terrific for Illinois employment.

Third, readers of this blog may know that I am in the process of rolling out a research business focusing on specialized asset protection. It’s been my intention to launch in the Chicago area. Lately, however, I’ve been thninking of opening up shop in southeast Wisconsin (where my family has a residence) due to the direction Illinois looks to be heading with taxes and its treatment of the business community. The passage of the “Business Opportunity Tax Act” could be the straw that breaks the camel’s back. I wonder how many other prospective Illinois business owners might be in the same boat?

Stay tuned…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Hinz, Greg. “New, wider tax plan rolls out in Springfield.” Greg Hinz On Politics. 24 Jan. 2017. (http://www.chicagobusiness.com/article/20170124/BLOGS02/170129931/springfield-lawmakers-roll-out-new-wider-tax-hike-plan). 26 Jan. 2017.

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Chicago Taxpayers To Be Hit With Property Tax Hike, Garbage Collection Fee?

Chicagoans- think all the recent talk of new/higher fees, fines, and taxes is garbage?

You’re right, in a way.

I just finished reading some material from Chicago Sun-Times City Hall reporter Fran Spielman over on that paper’s website.

Chicago taxpayers had better be prepared for their pocketbooks to take a hit in the coming months.

Spielman talked Sunday afternoon about the City’s need for $754 million in new revenue, and the options submitted by City Council to Mayor Rahm Emanuel to help “generate” it. That included:

• Property tax hike
• Garbage collection fee
• Ride-hailing companies (Uber) surcharge
• Congestion fee
• Bicycle license
• Gas tax hike
• Sales tax hike
• City income tax

Which ones stand a good chance of being put into play by City Hall? Spielman wrote:

Ald. Carrie Austin, outspoken chairman of the City Council’s Budget Committee, put Emanuel on the spot during the mayoral campaign when she called a post-election property tax hike inevitable. But she was right — especially now that a Circuit Court judge has overturned Emanuel’s plan to save two of four city employee pension funds.

The only question is, how much will property taxes be going up?

Emanuel has already offered to raise property taxes by $225 million for the Chicago Public Schools, provided teachers accept the equivalent of a 7 percent pay cut and the state reimburses CPS for “normal” pension costs…

(Editor’s note: Bold added for emphasis)

In a separate Sun-Times piece from last night, Spielman added:

Ald. Pat O’Connor (40th), Emanuel’s City Council floor leader, said it’s no longer an issue of whether Chicago will have a garbage-collection fee. The question is, how much?

“That’s where the real discussion will take place. It will be around the cost, rather than the enablement. We need to see the numbers that show how much we’ll save and how much it would generate,” he said…

(Editor’s note: Bold added for emphasis)

Property tax hike. Check. Garbage collection fee. Check.

Waiting to see what actually transpires. In the mean time, Chicago taxpayers might want to check out those Spielman articles to get a better idea of what might be in store for them shortly.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Spielman, Fran. “Property tax hike, garbage fee, congestion tax all on the table.” Chicago Sun-Times. 16 Aug. 2015. (http://chicago.suntimes.com/news/7/71/876236/chicago-budget-revenue-tax-ideas). 20 Aug. 2015.

Spielman, Fran. “Chicago homeowners likely to pay for garbage pickup soon.” Chicago Sun-Times. 19 Aug. 2015. (http://chicago.suntimes.com/news/7/71/891070/garbage-collection-fee-looks-likely-chicago-homeowners). 20 Aug. 2015.

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Thursday, August 20th, 2015 Debt Crisis, Education, Entitlements, Fiscal Policy, Government, Income, Taxes, Transportation, Vehicles Comments Off on Chicago Taxpayers To Be Hit With Property Tax Hike, Garbage Collection Fee?

Exit Of Illinois Businesses Picking Up Steam?

Illinois companies are leaving the state for more business-friendly environments.

A tale I come across on a regular basis these days, despite all the sustained propaganda to the contrary.

Marissa Bailey reported on the CBS 2 (Chicago) website Monday regarding the situation of Chicago-based Hoist Liftruck, which just announced they’re departing for Indiana:

Gov. Rauner ran his campaign on what he could do to keep small businesses in Illinois. On Monday, he was begging small businesses to stay in the state.

CBS 2’s Marissa Bailey talked with a business owner who is leaving Illinois for a better deal.

Its 300 employees — most in a trade – work hard in a warehouse the size of two city blocks. But it’s the company’s home for only a few more months.

“I think if anyone looks at the numbers, they would make the same decision I did,” President and CEO Marty Flaska says.

He’s moving his company to East Chicago, Ind. early next year. Flaska says being a manufacturer in Illinois just got too hard. His biggest reasons involve the worker’s compensation system here, the cost of property taxes and lastly, he says, “the uncertainty about income tax in the state and where it may go.”

Flaska estimates that by moving he can save $6 million upfront and $2 million each additional year, thanks to property incentives, state grants and tax cuts in Indiana…

(Editor’s note: Bold added for emphasis)


“Chicago Business Bailing On Illinois”
CBS 2 Video

On the heels of that Hoist Liftruck announcement, Bob Adelmann added over at The New American magazine website:

On Thursday, Hoist Liftruck’s announcement that it was moving more than 500 manufacturing jobs to Indiana was just the latest in a long and almost fevered list of other companies seeking to escape Illinois’ outrageous workers compensation costs and high taxes.

On July 14 machine-maker DE-STA-CO said it was moving 100 jobs to Tennessee. The next day energy processor Bunge North America said it was shutting down its plant in Bradley, Illinois, and laying off 210 workers. The day after that General Mills pulled the plug on its manufacturing plant in West Chicago, terminating 500 workers.

A week later Mitsubishi Motors announced it was closing its production facilities that made its Outlander, ending 918 jobs there, even though there was the threat it would have to return some of the $9 million Illinois paid to get them to move there a few years ago.

Five days after that Mondelez (makers of Oreos and Chips Ahoy) said it was laying off 600 manufacturing jobs at its Chicago South Side facilities.

On August 12 Kraft Heinz, within weeks of their merger, announced its goal of saving $1.5 billion by the end of 2017. First to go were 700 jobs at Kraft’s Northfield facility. The very next day Motorola Mobility announced it was cutting its workforce in Chicago by 25 percent, eliminating another 500 jobs…

Adelmann also noted:

Chief Executive Magazine’s “2014 Best and Worst States for Business” report ranked Illinois 48th out of 50…

I dug up the most recent edition of that same report. The results of Chief Executive’s 11th annual survey have Illinois ranked again as the 48th “worst state for business” in 2015, following New York and absolute “worst state” California.

California, New York, and Illinois. What could those three possibly have in common that might account for such low marks?

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Bailey, Marissa. “For One Chicago Business, Illinois Became Too Inhospitable.” CBS 2. 17 Aug. 2015. (http://chicago.cbslocal.com/2015/08/17/for-one-chicago-business-illinois-became-too-inhospitable/). 18 Aug. 2015.

Adelmann, Bob. “Trickle of Companies Leaving Illinois Turning Into a Flood.” The New American. 14 Aug. 2015. (http://www.thenewamerican.com/economy/sectors/item/21405-trickle-of-companies-leaving-illinois-turning-into-a-flood). 18 Aug. 2015.

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Tuesday, August 18th, 2015 Business, Government, Income, Taxes Comments Off on Exit Of Illinois Businesses Picking Up Steam?

Gold Taxation Issues

I have a feeling that a number of Survival And Prosperity readers either own gold or might be thinking about acquiring the precious metal in the future.

Tonight, I happened to come across an article on MarketWatch.com entitled “The tax implications of owning gold.” Bill Bischoff wrote yesterday:

In this environment, the idea of investing some taxable money in gold and other precious metal assets could be appealing. But read this to make sure you understand the tax angles…

It’s an insightful read. For example, I thought the sale of physical gold (both bullion and collectible) was subject to the maximum federal income tax rate of 28 percent- at a minimum. However, Bischoff explained:

Here’s how the 28% maximum rate deal works. If you are in the 28%, 33%, 35%, or 39.6% federal income tax bracket, net long-term gains from collectibles, including precious metal assets, are taxed at 28%. However, higher-income folks may also owe the dreaded 3.8% net investment income tax. If so, the maximum effective federal rate on long-term gains from precious metals can be 43.4% (39.6% + 3.8%).

If you are in the 10%, 15%, or 25% bracket, your net long-term gains from collectibles, including precious metal assets, are taxed at your regular rate of 10%, 15%, or 25%. In these brackets, you don’t have to worry about owing the 3.8% net investment income tax…

Interesting. You can read the entire piece over on the MarketWatch website here.

Just remember to consult a competent tax professional regarding such matters rather than relying on something you read on the Internet.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Thursday, July 16th, 2015 Commodities, Income, Investing, Precious Metals, Taxes Comments Off on Gold Taxation Issues

Illinois Tax Hikes Coming Warn Municipal Bond Fund Managers

Talk of rapidly-approaching tax hikes in the “Land of Lincoln” is growing. Reuters’ Nick Brown, Megan Davies, and Karen Pierog reported yesterday:

With no easy way to financially engineer or negotiate its way out of a budget and pensions crisis, Illinois is likely to dish out some unpleasant medicine to its residents in the next few years. And investors say that is most likely to come in the form of higher taxes.

Given the Democrats’ control of the state legislature and their opposition to many proposals for spending cuts, municipal bond fund managers see little alternative for Republican Governor Bruce Rauner other than eventually agreeing to hike taxes, such as raising the state’s income tax or broadening its sales tax base…

(Editor’s note: Bold added for emphasis)

Regular readers of Survival And Prosperity shouldn’t be surprised when the hikes (fees, fines, and taxes) arrive, as they’ve been discussed on this blog for quite some time now. The tragedy is that Springfield continues to waste time and resources on trivial matters while neglecting to tackle crucial issues like the well-publicized debt crisis. Monique Garcia and Kim Geiger reported on the latest nonsense preoccupying the politicians. From the Chicago Tribune website this afternoon:

Democratic Speaker Michael Madigan’s effort to ask voters to approve a measure to impose higher income taxes on millionaires failed in the House on Thursday, but provides the powerful Southwest Side politician ammunition to attack Republicans in next year’s legislative campaigns.

The proposal needed 71 “yes” votes to pass, but received just 68. But now there’s a roll call, and Madigan’s Illinois Democratic Party could send out mailers criticizing Republicans who voted against the idea. Democrats already have sent out attack ads against Republicans who did not vote in favor of a property tax freeze last week

(Editor’s note: Bold added for emphasis)

Games. Stupid political games as the state’s “financial reckoning day” fast approaches.

By the way, back on March 24 of last year I blogged about that push for a “millionaire’s tax” in Illinois. My prediction now is pretty much the same as it was a year ago:

Should Illinois Democrats jack up their income taxes, I suspect the number of Illinois millionaires right before the tax hike is implemented will plummet. Revenue will follow. Out-of-state vacation homes in Indiana and Wisconsin will be declared as primary residences.

The only difference being, I forgot to mention Michigan vacation homes.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Brown, Nick, Davies, Megan and Pierog. “As Illinois runs out of options in budget crisis, tax rises seen in the cards.” Reuters. 20 May 2015. (http://news.yahoo.com/illinois-runs-options-budget-crisis-tax-rises-seen-051616644.html). 21 May 2015.

Garcia, Monique and Geiger, Kim. “Madigan’s ‘millionaire tax’ question fails in House.” Chicago Tribune. 21 May 2015. (http://www.chicagotribune.com/news/local/politics/ct-rauner-warns-of-long-overtime-20150521-story.html). 21 May 2015.

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Friday, May 22nd, 2015 Debt Crisis, Fiscal Policy, Government, Political Parties, Socialism, Spending, Taxes, Wealth Comments Off on Illinois Tax Hikes Coming Warn Municipal Bond Fund Managers

Bill Introduced To Permit Illinois Municipalities To File For Bankruptcy

Since I started blogging about a U.S. financial crash back on Memorial Day Weekend 2007, I’ve believed one casualty will be municipal government. Particularly in Illinois. So imagine my non-surprise when I spotted an article on the Chicago Tribune website a couple of days ago about proposed legislation at the state level granting Illinois towns the authority to file for bankruptcy. Nick Swedberg of the Associated Press wrote on March 26:

Stressed by pension debt, other financial issues and the possibility losing a chunk of their state aid, some Illinois cities want the option to file for bankruptcy. They’ve found an ally in a Republican lawmaker, who’s proposed legislation to allow municipalities to follow in the footsteps of Detroit and other cities in restructuring debt and paying back creditors…

Rep. Ron Sandack is sponsoring legislation that would grant authority for communities to file for bankruptcy under Chapter 9 of the federal code. The Downers Grove Republican says it’s a “measure of last resort,” especially with Gov. Bruce Rauner’s proposal in next year’s budget to cut in half the local governments’ share of state income taxes by 50 percent.

“It’s just giving time and space to do things right,” he said…

Swedberg added later in the piece:

Municipal bankruptcies are rare, NCSL data shows. Of 37 local government filings since 2010, only 8 were cities, with the majority filed by utilities and special districts.

Detroit filed for the nation’s largest municipal bankruptcy in July 2013, looking to restructure $12 billion of debt…

It’s true. Municipal bankruptcies haven’t happened too often. But keep in mind what Eric Weiner wrote on the NPR website back on February 28, 2008:

For most of U.S. history, cities and towns were not eligible for bankruptcy protection. But during the Great Depression, more than 2,000 municipalities defaulted on their debt, and they pleaded with President Roosevelt for a federal bailout. “All they got was sympathy,” reported Time magazine in 1933. Instead, Roosevelt pushed through changes to the bankruptcy laws that allows towns and cities to file for bankruptcy. They even got their own section of the bankruptcy code: Chapter Nine…

(Editor’s note: Bold added for emphasis)

There’s also this from Robert Slavin on The Bond Buyer website back on January 14:

For the municipal bond industry, 2015 marks the midpoint in what may turn out to be the decade of the bankruptcy.

Four of the five largest municipal bankruptcy filings in United States history have been made in roughly the last three years, a trend analysts attribute to the aftereffects of the 2008 credit crisis and Great Recession, as well as changing attitudes about debt.

“The crash of 2008 and five years of stagnation preceded by years of escalating wages, pensions and Other Post-Employment Benefits set the stage for our recent Chapter 9 filings,” said Arent Fox partner David Dubrow.

Chapter 9 municipal bankruptcy was adopted in 1937 but had been rarely used, particularly by large governments. However, since November 2011 San Bernardino, Calif., Stockton, Calif., Jefferson County, Ala., and Detroit have filed four of the five largest bankruptcies as measured by total obligations.

(Editor’s note: Bold added for emphasis)

Could the specter of Meredith Whitney, the “Diva Of Doom,” be returning to take revenge on the municipal bond industry?

I’m not surprised Illinois municipalities would be interested in House Bill 298. From Patrick Rehkamp and Andrew Schroedter on the website of the Chicago-based Better Government Association back on December 6, 2014:

Reasons for filing vary but often include troubled public development projects, unanticipated hefty legal judgments against a taxpayer-backed entity, or massive pension and bond debt payments that leave a municipality cash-strapped and unable to cover operating costs of employee salaries, vendor payments and other expenses.

(Editor’s note: Bold added for emphasis)

The public pension crisis in Chicago and Illinois has been well-publicized for some time now. And while such entitlements are supposedly protected by a provision in the 1970 Illinois Constitution, the BGA noted in their piece:

In Illinois, public employee pensions are guaranteed by the state constitution. But in the Detroit and Stockton, California bankruptcy cases, federal judges have ruled that pension benefits can be adjusted, the same as other debts, despite a constitutional guarantee.

(Editor’s note: Bold added for emphasis)

You can track the progress of HB 298 on the Illinois General Assembly website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Swedberg, Nick. “Bill pushes for possible municipal bankruptcies in Illinois.” Associated Press. 29 Mar. 2015. (http://www.chicagotribune.com/news/sns-bc-il–closer-look-bankruptcy-20150329-story.html). 3 Apr. 2015.

Weiner, Eric. “What Happens When City Hall Goes Bankrupt?” NPR. 28 Feb. 2008. (http://www.npr.org/templates/story/story.php?storyId=60740288). 3 Apr. 2015.

Slavin, Robert. “Why So Many Big Bankruptcies?” The Bond Buyer. 14 Jan. 2015. (http://www.bondbuyer.com/news/markets-buy-side/why-so-many-big-bankruptcies-1069539-1.html). 3 Apr. 2015.

Rehkamp, Patrick and Schroedter, Andrew. “Next Up: Illinois Municipal Bankruptcy?” Better Government Association. 16 Dec. 2014. (http://www.bettergov.org/next_up_illinois_municipal_bankruptcy/). 4 Apr. 2015.

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Sunday, April 5th, 2015 Bankruptcy, Credit, Debt Crisis, Defaults, Depression, Entitlements, Government, Legal, Political Parties, Recession, Taxes Comments Off on Bill Introduced To Permit Illinois Municipalities To File For Bankruptcy

The Civic Federation Proposes Less Government Spending, More Taxes To Tackle Illinois’ $6.4 Billion In Unpaid Bills

Regular Survival And Prosperity readers shouldn’t be surprised to hear the following from The Civic Federation, an independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois. From a press release last Thursday:

In a report released today, the Civic Federation’s Institute for Illinois’ Fiscal Sustainability proposes a comprehensive five-year plan that responds to the dire reality of Illinois’ financial condition with painful, but necessary recommendations. The plan immediately stabilizes the State’s operating budget and establishes a sustainable long-term financial plan that would pay off Illinois’ unpaid bill backlog of approximately $6.4 billion. The full 56-page report is available here.

Nearly five years after the official end of the national economic downturn, Illinois is still burdened with billions of dollars in unpaid bills. The State’s five pension systems, underfunded for decades and further weakened by recession-driven investment losses, are consuming a growing share of annual operating revenues. Temporary income tax rate increases enacted in 2011 helped the State cope with these massive problems, but the higher rates began to phase out on January 1, 2015 and the State’s income tax revenues are expected to plummet by $5.2 billion between FY2014 and FY2016.

“The incomplete FY2015 budget resulted in a greater deterioration of Illinois’ finances and made the necessary actions to fix this crisis even more painful,” said Laurence Msall, president of the Civic Federation. “Illinois cannot afford such a steep rollback of its tax rates without eliminating entire areas of State services or completely restructuring the government.”

After examining the effectiveness of multiple budget scenarios based on the fundamental long-term financial goals detailed below, the Federation proposes the following recommendations as part of a comprehensive five-year plan…

In a nutshell, The Civic Federation proposes less government spending and more taxes for the State of Illinois. From that press release:

1. Fix Fiscal Cliff in FY2015: Rather than sharply dropping income tax rates by 25% in one year, the State should retroactively increase the income tax rate to 4.25% for individuals and 6.0% for corporations as of January 1, 2015. The State could then provide additional tax relief by rolling back the rates on January 1, 2018 to 4.0% for individuals and 5.6% for corporations.
2. Control State Spending: The State should restrict discretionary spending growth from the 2.7% level shown in its three-year projections to 2.0%, closer to the rate of inflation. This could reduce total State spending by $1.3 billion over five years.
3. Broaden the Income Tax Base to Include Some Retirement Income: Out of the 41 states that impose an income tax, Illinois is one of only three that exempt all pension income. To create greater equity among taxpayers, the State’s income tax base should include non-Social Security retirement income from individuals with a total income of more than $50,000.
4. Expand Sales Tax Base to Include Services: Illinois should expand its sales tax base to include a list of 32 service taxes proposed by Governor Rauner. Due to the complexity of sourcing rules and collections for new businesses that are not currently required to collect sales taxes, it is estimated this expansion could take up to two fiscal years to fully implement.
5. Temporarily Eliminate Sales Tax Exemption for Food and Non-Prescription Drugs: To provide much-needed immediate revenue, the State should temporarily eliminate the tax exemption for food and non-prescription drugs. The State should apply the full 6.25% sales tax rate to food and over-the-counter drug purchases through FY2019 and then reinstate the exemption in FY2020 after the service tax expansion is fully implemented and the State’s backlog of unpaid bills is eliminated.
6. Expand the Earned Income Tax Credit to Provide Assistance to Low Income Residents: To help soften the impact of the State’s fiscal crisis on low income residents, the Civic Federation proposes an increase in the State’s Earned Income Tax Credit from 10% of the federal credit to 15% of the federal credit by FY2018…

At this point, I wholeheartedly believe it’s just a matter of time now before a number of the above are implemented either willingly (legislatively) or forcefully (“financial reckoning day”) in the “Land of Lincoln” down the road.

As such, it might be wise for Illinoisans to start preparing (if they haven’t done so already) for an impending hit to household finances and elsewhere.

You can read the entire press release and obtain that report on The Civic Federation’s website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Sunday, February 15th, 2015 Debt Crisis, Entitlements, Fiscal Policy, Government, Income, Spending, Taxes Comments Off on The Civic Federation Proposes Less Government Spending, More Taxes To Tackle Illinois’ $6.4 Billion In Unpaid Bills

Illinois House Speaker Michael Madigan Vows To Get State Income Tax Hike Made Permanent

The Illinois House of Representatives approved a $35.7 billion state spending plan yesterday which didn’t factor in funds from a 2011 temporary income tax hike being made permanently available. I surmised Tuesday:

So does this mean Illinois Democrats have abandoned their push to make the temporary income tax hike permanent? I doubt it. This is “Madiganistan,” after all. And what Mike wants, Mike gets.

I wouldn’t be surprised to see some sort of maneuvering being carried out to eventually land these funds. Perhaps another “temporary” increase in such taxes sometime after the November 2014 election, with buzz words such as “fiscal emergency” and “for the children” being used to justify the measure?

Monique Garcia, Ray Long, and Maura Zurick reported on the Chicago Tribune website last night:

Speaker Michael Madigan acknowledged the budget proposal would leave unfinished business and vowed to spend the summer and fall working to get the income tax hike made permanent to provide more money to run state government. The approach also ensures the governor’s race will continue to be framed up by opposite positions on a tax hike Democratic Gov. Pat Quinn and Republican challenger Bruce Rauner have staked out.

“My expectation is that this issue will be taken into the general election and I think the governor will be supportive of an extension of the income tax increase through the general election,” Madigan said. “My expectation is that Mr. Rauner will be against. So you’ll have a clear line of division going into the election. And people can make their choice.”

(Editor’s note: Bold added for emphasis)

Hmmm. Should Governor Quinn be re-elected, one more buzz word I suspect Illinoisans might hear before legislative action is taken by the Democrats to make the income tax hike permanent is “mandate,” as in “Illinois voters have given us a mandate to make the temporary income tax hike permanent during this fiscal emergency. Remember- it’s for the children!”

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Garcia, Monique, Long, Ray and Zurick, Maura. “State budget would put off tough decisions until after election.” Chicago Tribune. 27 May 2014. (http://www.chicagotribune.com/news/politics/clout/chi-state-budget-would-put-off-tough-decisions-until-after-election-20140527,0,6506902.story). 28 May 2014.

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Wednesday, May 28th, 2014 Fiscal Policy, Government, Income, Political Parties, Taxes Comments Off on Illinois House Speaker Michael Madigan Vows To Get State Income Tax Hike Made Permanent

Illinois Democrats Abandoning Attempt To Make Temporary Income Tax Hike Permanent?

“In his election-year budget speech Wednesday, Gov. Pat Quinn called on lawmakers to make permanent the 67 percent temporary income tax increase they approved in 2011…

Quinn’s budget speech was the first time he directly addressed what should be done about the pending expiration of much of the temporary tax increase. When lawmakers approved raising the state’s personal income tax rate from 3 percent to 5 percent, they stipulated that the rate should drop to 3.75 percent on Jan. 1, 2015…”

The State Journal-Register (Springfield), March 26, 2014

There’s news coming out of Springfield that the Democrats are preparing an Illinois state budget that accounts for the expiration of the temporary income tax hike they approved in 2011. Doug Finke reported on The State Journal-Register website last night:

House Democrats are preparing a new state budget that allows most of the temporary income tax increase to expire on schedule at the end of the year.

“Today we’re going to have our (budget negotiators) working toward a middle-of-the-road budget that would be consistent with the revenue estimates which have been adopted by the House,” House Speaker Michael Madigan, D-Chicago, said Monday. “The income tax increase would not be extended.”

From an Associated Press piece earlier today:

House Speaker Michael Madigan emerged from a Memorial Day caucus meeting and told reporters he was dropping the idea of making the 5 percent income tax permanent — and crafting a budget blueprint that holds the line on spending but is not the “doomsday” plan the House overwhelmingly rejected Friday.

“We’re going to call upon the agencies and those that receive appropriations from the Legislature to live within their means,” said Madigan, a Chicago Democrat. “We understand the way this is… Let’s take a good hard look at it and get the job done.”

So does this mean Illinois Democrats have abandoned their push to make the temporary income tax hike permanent? I doubt it. This is “Madiganistan,” after all. And what Mike wants, Mike gets.

I wouldn’t be surprised to see some sort of maneuvering being carried out to eventually land these funds. Perhaps another “temporary” increase in such taxes sometime after the November 2014 election, with buzz words such as “fiscal emergency” and “for the children” being used to justify the measure?

Stay tuned…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Finke, Doug. “House Democrats work on budget without tax increase.” The State Journal-Register. 26 May 2014. (http://www.sj-r.com/article/20140526/NEWS/140529531/). 27 May 2014.

“Illinois Democrats give up on tax-hike extension.” Associated Press. 27 May 2014. (http://www.chicagobusiness.com/article/20140527/NEWS02/140529846/illinois-democrats-give-up-on-tax-hike-extension#). 27 May 2014.

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Tuesday, May 27th, 2014 Fiscal Policy, Government, Income, Political Parties, Spending, Taxes Comments Off on Illinois Democrats Abandoning Attempt To Make Temporary Income Tax Hike Permanent?
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