tax hikes

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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Illinois ‘Grand Bargain’ Legislation Includes 32 Percent Personal Income Tax Hike

Illinois taxpayers may get hit with a significant income tax hike pretty soon. John O’Connor of the Associated Press reported Sunday on The State Journal-Register website:

If last week’s action is any indication, the Democratic and Republican leaders of the Illinois Senate are serious about attempting to bust the state’s 18-month budget deadlock – quickly…

Promising to act on a package by month’s end, they introduced 13 measures Wednesday that included non-budget-related sweeteners for both sides. By Thursday, they had been rapidly assigned public committee hearings…

Here’s a look at other major pieces of the legislation some in the Capitol have nicknamed the “grand bargain”:

* Income tax increase: The personal income tax would jump from 3.75 percent to 4.95 percent, a plan to generate $4.1 billion a year. With spending cuts, Democrats argue, that could eliminate what the governor’s office estimates will be a $5.3 billion deficit on the June 30 end of the fiscal year…

(Editor’s note: Bold added for emphasis)

The proposed 32 percent income tax hike is not a sure thing, as O’Connor noted:

The outstanding question is if a Senate-approved deal would ultimately pass muster with Democratic House Speaker Michael Madigan, who has refused to entertain Rauner’s pro-business agenda as part of budget talks…

Six years ago, the 3 percent personal income tax rate jumped to 5 percent until 2015, when the rate rolled back to the current 3.75 percent.

Like I just suggested to Chicago taxpayers in the previous post, Illinois taxpayers might want to take heed of what’s potentially coming down the pipeline.

Other pieces of legislation include $7 billion more borrowing to pay off overdue bills (now at $10.7 billion), which you can read about on the The State Journal-Register site here.

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

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Moody’s On Chicago Public Schools Crisis: Consider Tax Levy, Pension Contribution Stoppage, Or Bankruptcy

“Chicago and New York rank at the bottom of a new analysis of fiscal strength based primarily on data from 2015 financial reports issued by the cities themselves. The analysis includes 116 U.S. cities with populations greater than 200,000.

Chicago’s position at the bottom of the ranking is no surprise to anyone who follows municipal finance. The Windy City has become a poster child for financial mismanagement, having suffered a series of ratings downgrades in recent years. Aside from having thin reserves and large volumes of outstanding debt, Chicago is notorious for its underfunded pension plans…”

The Fiscal Times, January 9, 2107

Moody’s Investors Service recently weighed in on Chicago’s well-publicized financial crisis. Last Thursday its Global Credit Research division published the following on the Moody’s website:

While unfunded pension liabilities will continue weighing on the City of Chicago’s (Ba1 negative) credit profile, plans to significantly increase contributions with higher taxes is a favorable departure from prior funding practices. However, the liquidity crisis at Chicago Public Schools (CPS — B3 negative) is worsening amid a continued budget impasse at the state level, Moody’s Investors Service says in two new research reports released today…

In “City of Chicago: Frequently Asked Questions,” Moody’s says despite the city’s expanding economy, revenue growth, and healthy liquidity, its pension burden is likely to remain among the highest of any rated, major local government for many years.

“While Chicago’s recent tax increases will provide revenue to significantly increase pension funding, the city’s unfunded pension liabilities exceed seven times its revenue and are projected to grow for at least 15 more years,” says Matt Butler, Vice President of Moody’s…

(Editor’s note: Bold added for emphasis)

The well-known credit rating agency added this about the city’s public school system:

In a separate report, “Chicago Public Schools: Frequently Asked Questions,” Moody’s states CPS’ fiscal pressures are intensifying due to depletion of reserves following years of imbalanced operations, unrealistic budget assumptions, and escalating pension costs…

Moody’s says CPS could consider more difficult options to address its finances should the State of Illinois (Baa2 negative) be unable or unwilling to provide additional relief: levy for debt service on GO alternate revenue bonds, stop making employer pension contributions, or seek state authorization to file for Chapter 9 bankruptcy…

(Editor’s note: Bold added for emphasis)

MarketWatch news editor Rachel Koning Beals expanded on Moody’s suggestions for dealing with the CPS situation. She wrote Saturday:

Moody’s has a revised shortlist of painful fixes for the public school system in Chicago.

One idea is to approve another increasingly politically unpopular property-tax levy to pay off debt, as the nation’s third-largest school district just issued another batch of high-interest bonds.

The second idea from the credit-ratings agency is to skip a pension payment to the Chicago Teachers’ Pension Fund, which would come just months after the district and its teacher‘s union hammered out an 11th-hour contract to avoid a second labor strike in a span of four years.

And last resort? Just declare bankruptcy already

(Editor’s note: Bold added for emphasis)

Who’s the say the City will act on any of these suggestions (at least, right away)? That being said, Chicago taxpayers and CPS employees/retirees might want to take heed of all this.

Head on over to the Moody’s Investors Service website here to read the entire release from the Global Credit Research division. It ain’t pretty.

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

Source:

Koning Beals, Rachel. “Maybe Chicago schools should declare bankruptcy and get it over with, says Moody’s.” MarketWatch. 14 Jan. 2017. (http://www.marketwatch.com/story/maybe-chicago-schools-should-declare-bankruptcy-and-get-it-over-with-says-moodys-2017-01-13). 16 Jan. 2017.

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Chicago Tribune Letter: ‘Chicago, And Its Surrounding Areas, Have Become Hell on Earth’

This morning I headed over to the Chicago Tribune website to see what’s cooking locally. On their homepage was a “story” link with the following headline:

“Letter: I’m leaving Chicago and I’m never coming back”

Figuring this should make some “entertaining” reading while I finished my coffee, I checked out the proclamation. The author sure didn’t pull any punches. Here’s a snippet:

I’ve come to understand that Chicago, and its surrounding areas, have become Hell on Earth for any thinking person with a modicum of self-respect.

The caustic combination of corrupt politicians with nothing but contempt for the public; a police force so broken down in spirit it visibly resents interaction with even law-abiding citizens; a criminal underclass empowered by the incessant drone of liberal rhetoric wandering the streets posing clear and present danger to everyone around them; and the enablers, who are everywhere, to say nothing of the ugly, decaying infrastructure, poor economy and joyless entertainment and leisure opportunities – it is for these reasons I have made the decision to disconnect forever…

(Editor’s note: Bold added for emphasis)

As regular readers of Survival And Prosperity know, I am one of those who left Chicago (Northwest Side) only three-and-a-half years ago due to concerns over increasing government mismanagement, crime, and costs of living- in no particular order. Besides, even though I really liked the neighborhood I had lived in for eight years, it was time for a new pad and home prices were just too damn high!

My girlfriend and I did what was right for us at the time and in advance of what we suspect lies ahead. But Chicago is still a great city with fantastic people (minus the criminal element), so much so not only do I understand why one might still choose to reside there, but even I won’t go so far as to proclaim “I’m never coming back.”

I remain optimistic about the long-term prospects for the “Windy City.” That being said, I do believe conditions in the city will erode before improving again. For those dead set on remaining in town, please do yourself a favor and take a good, hard look at your financial and personal safety capabilities for successfully navigating any “storm” that may lie ahead. For example, how do your finances look with the real prospect of future tax hits down the road?

More later. And to read that entire letter sent to the Chicago Tribune, head on over to their website here.

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

(Editor’s note: A qualified professional should be consulted prior to making a financial decision based on material found in this weblog. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/Editor of this blog is 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 contained herein.)

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2017 Tax Hits To Chicagoans

“Broken record” time.

“New/higher fees, fines, and taxes, and less government services.”

Regular readers of Survival And Prosperity (and older ones from my Boom2Bust days) know I’ve been warning about this for years now (since 2008?) concerning Chicago- as well as Cook County, Illinois, and lots of other places aroud the country.

And it’s pretty much what has transpired from what I’ve seen.

Particularly in the “Windy City”- where the hits keep on coming. Hal Dardick reported on the Chicago Tribune website this morning:

Chicago property owners hoping for a respite from rapidly rising taxes will be disappointed in 2017, when city government and Chicago Public Schools will continue digging deeper into their pocketbooks.

Two more major property tax increases are coming. So is a new tax on water and sewer service. And some city dwellers will face other rising costs: a fee for each store-provided disposable bag and slightly higher Park District fees.

Come mid-year, city and suburban residents will be paying a new sweetened beverage tax effective in all of Cook County, and another round of Metra fare hikes is coming soon. Here’s a look at what to expect…

(Editor’s note: Bold added for emphasis)

Dardick did a good job summarizing the dents Chicagoans (and Chicagoland residents) could expect to their finances in the new year. Head on over to the Tribune website here to get the entire story.

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

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Taxing Time For Chicagoans

The elections are over. So it’s time for “higher/new fees, fines, and taxes,” as I routinely point out in Survival And Prosperity.

Chicagoans found out yesterday what kind of impact City Hall’s latest “revenue enhancements” will have on their personal finances. Julian Crews, Dan Ponce, and Dana Rebik reported on the WGN-TV Chicago website Wednesday:

The Chicago City Council voted unanimously to pass Mayor Rahm Emanuel’s $8.2 billion 2017 budget Wednesday…

For taxpayers, the hardest pill to swallow in the budget may be a nearly 30 percent increase on water and sewer bills. The hike will be phased in over four years, and is expected to raise nearly $240 million to help shore up the municipal workers pension fund.

But the big impact to taxpayers will come in the form of a tiered increase in property taxes to fund police and fire pensions approved by the Council last year.

Other new fees include:

7-cent fee for all plastic AND paper bags to encourage people to bring reusable bags to the grocery store.
3.5 percent amusement tax for tickets to concerts, sporting events and musicals…

(Editor’s note: Bold added for emphasis)

Crews, Ponce, and Rebik also pointed out coming higher fees with parking rates downtown, around Wrigleyville, and at both Midway and O’Hare airports. More parking meters will be popping up in the Loop and in city neighborhoods as well.

Anyone who’s been paying attention might have observed a disturbing trend lately with Chicago’s fees/fines/hikes. John Byrne and Hal Dardick reported on the Chicago Tribune website this morning:

The average family will pay nearly $1,700 more a year to the city and Chicago Public Schools than they did before the mayor took office in 2011 once all of Emanuel’s tax and fee increases take full effect. There’s been a series of property tax hikes. There was a water and sewer rate increase, plus a new tax on top of that. Not to mention a new garbage hauling fee, 911 phone tax hike, vehicle sticker fee increase and a tax on cable television…

(Editor’s note: Bold added for emphasis)

“$1,700 more a year… than they did before the mayor office in 2011”

Ouch. Byrne and Dardick added:

Even with all of that, taxpayers may be asked for more money in the coming years. Emanuel’s plans for shoring up long-neglected city worker pension funds will require the city to come up with hundreds of millions of dollars more by the early to mid-2020s

(Editor’s note: Bold added for emphasis)

In the meantime, the reporters calculated the “typical” Chicago homeowner ($250,000 residence) can expect to see their tax bill rise another $400 in 2017.

As a former resident of Chicago, I can understand why people would want to live there. That being said, Chicagoans have been required to “pay to play.” And that trend might not be their friend if that Tribune analysis plays out.

For those choosing to remain in the “City By The Lake,” it might be wise for these individuals to take a good, hard look at their finances to figure out if they can keep residing there should the cost of living continue its upwards trajectory.

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

Sources:

Crews, Julian, Ponce, Dan, and Rebik, Dana. “City Council unanimously passes $8.2 billion budget, including new taxes and fees.” WGN-TV Chicago. 16 Nov. 2016. (http://wgntv.com/2016/11/16/chicago-city-council-expected-to-pass-mayors-2017-budget-today/). 17 Nov. 2016.

Byrne, John and Dardick, Hal. “The tab on Emanuel’s series of tax hikes: $1,700 a year for the average family.” Chicago Tribune. 17 Nov. 2016. (http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-chicago-city-council-budget-vote-met-1117-20161116-story.html). 17 Nov. 2016.

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