* From the Commission on Government Forecasting and Accountability…
Monthly income tax revenues leaped in April, growing by $1.521 billion. The infusion of cash into the State’s coffers allowed for the repayment of a voluminous amount of overdue Medicaid bills. That action subsequently generated a massive amount of federal sources over $1 billion during a single month.
That’s fantastic news.
* And now the bad news. You knew there had to be bad news, right? This is Illinois, after all…
(P)reliminary Commission assumptions are that gains are strongly related to final and estimated payments stemming from actions taken by taxpayers in efforts to minimize the tax consequences of the higher 2013 federal tax rates. As such, they are not repeatable in future fiscal years, and should be viewed more in terms of a “one-time” event.
As will be discussed in a following section, Illinois’ employment situation is dominated by less than positive news, offering little in the way of argument for sustainable higher expectations.
Bummer.
- RonOglesby - Friday, May 3, 13 @ 9:05 am:
Makes sense. taxes can drive behavior. in this case behavior to avoid future tax increases or realize gains now, vs having to pay more taxes on them later.
- Harry - Friday, May 3, 13 @ 10:03 am:
Well, of course. Couple of days ago I read a breathless-sounding piece about how the Feds are actually going to retire a little debt; buried in about the 6th paragraph it mentioned that this was due to a revenue bump where a lot of companies accelerated their 2013 dividends into the last quarter of 2012, and a lot of corporations, partnerships and individual proprietors who have the ability shifted income forward a month. So, 1Q 2013 will look dismal compared top 4Q2012. Since Federal taxable income drives IL taxable income…
But people should just go on believing that taxes don’t motivate behavior.
- cover - Friday, May 3, 13 @ 10:05 am:
At least this one-time revenue spike was used for a one-time purpose, paying down backlogged Medicaid bills. As long as the final budget deal for fiscal year 2014 doesn’t include new spending based on a repeat of this one-time revenue increase, the state is better off from having received the extra cash.
- Grandson of Man - Friday, May 3, 13 @ 10:08 am:
I think many would agree that non-coercive plans to create jobs and bring in revenue are the best, to either minimize or eliminate cuts and tax increases. I don’t yet know enough about fracking to support it, so I won’t take a position. I support legalizing marijuana but I don’t think we’re anywhere near doing it, after barely passing the nation’s most restrictive medical marijuana bill in the House. That bill will probably pass in the Senate, and I expect Quinn will sign it.
As far as the 2013 federal income tax increase, I’m glad it was for earnings starting at $400,000 per year, and that the president supported it even though he wanted to raise taxes on those making $250,000 or more. I don’t think someone making up to $250,000 per year is wealthy, especially living in Chicago. The folks with the large income gains are at the very top, and that’s where to go for tax increases.
- Small Town Liberal - Friday, May 3, 13 @ 10:27 am:
- But people should just go on believing that taxes don’t motivate behavior. -
Who believes that?
- TooManyJens - Friday, May 3, 13 @ 11:08 am:
==Who believes that? ==
Straw liberals.
- Grandson of Man - Friday, May 3, 13 @ 11:21 am:
>>- But people should just go on believing that taxes don’t motivate behavior. -
Who believes that?
- Grandson of Man - Friday, May 3, 13 @ 11:39 am:
Sorry about my last post. I was lingering too long on it and it didn’t take when I posted it.
I was looking at the unemployment history of Illinois, and it was around 8% in 1992, when the top federal income tax was at 31%. In 1993 the rate was raised to 39.6%, and the unemployment rate began dropping and was around 5% from 1995-2001. It seems that any negative consequence from that tax increase was offset by economic gains.
On the corporate tax side, effective rates have been at historical lows in recent times. They are now around 17% and have been dropping continually since 1950, when they were around 50%. Corporate tax rates as part of GDP are also at historical lows and have been dropping since the 1950s. The share of income for the so-called 1% was at the same historically-high rate when the Great Depression started as it’s been recently (and taxes were also historically low). During the 1950s, the share of income for the wealthiest was much lower, yet the overall economy was better.
I’m afraid that we’re at a new normal, when many wealthy folks sell off businesses, homes and assets because of small income tax increases, and any income tax increase for the wealthy is met by crushing resistance from the likes of the IPI, Civic Federation and other such interests. They want to divest themselves of any fiscal responsibility to pay more during tough times, and they work hard at fomenting resentment between those who have less and those who have slightly more.
To recap, during better economic times we had higher taxes and the share of income belonging to the wealthiest was historically low. If taxes are evil, as some want us to believe, how can that be?
- Cincinnatus - Friday, May 3, 13 @ 1:59 pm:
GoM,
Bubbles.
- RonOglesby - Friday, May 3, 13 @ 2:30 pm:
@Grandson,
you are missing lots of other changes in tax code, state of economy etc. You also miss that throughout the past 15 or more years we continue to reduce the income tax % on lower end earners. Less and less “pay into the system” from an income tax perspective. We could also map some of what you have said to that vs top rates.
in the end correlation causation.
But like anything taxes shape behavior. AND assuming taking more from just the well to do will pay our bills is ignorance of the numbers involved. Was it the bloomberg study that showed you could set a federal rate at 75% of ever dollar of income above 250k and still not pay our deficit much less debt.
We need a broad tax base, with simple tax compliance. Simple means fewer deductions and loopholes. But there is an entire lobby that loves complex taxes and carve outs. Its power to offer that.
Hell I say flat tax above a Specific dollar figure (national and Illinois) Pick a figure… 50% above poverty line? or the poverty line. 30K or so for a family. then X% above that. Done. broad simple tax, no deductions.
- RonOglesby - Friday, May 3, 13 @ 2:31 pm:
I had a not equal sign between correlation and causation.. guess the text box didnt like it!