* Subscribers know more about this development…
House Democrats say they’re working behind the scenes to draw up their own budget plan they hope can pass before a May 31 deadline […]
“The truth is that what the governor is asking for is that we wholeheartedly accept his political ideology and agenda in exchange for a balanced budget,” Cullerton spokeswoman Rikeesha Phelon said. “The people of Illinois deserve a balanced budget with or without Gov. Rauner getting what he wants on a number of political fronts.”
Democrats aren’t saying what their budget plan would look like. If it contained a tax hike, that would play into Rauner’s hands. The governor could veto the measure and force lawmakers back to the table over the summer as he airs millions of dollars in TV ads ripping Democrats for trying to raise taxes before making other fixes.
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. […]
“What is quite simple a solution is to raise taxes,” said Tom Metzold, senior portfolio manager at Eaton Vance Management, which has been paring down its Illinois exposure. “You’re going to have a game of chicken over who blinks first - the cutting expenditure side or raising taxes side.” […]
“It doesn’t take much of a tax increase and/or a combination of some spending cuts to solve their problems, it just takes the political will,” said Guy Davidson, director of Municipal Fixed Income at AllianceBernstein, which owns some Illinois state general obligation bonds.
While Illinois ranks 31st among the states in terms of its state business tax climate for 2015, according to the Tax Foundation research group, its flat personal income tax rate is well below many other states, particularly for higher-income earners.
Davidson is way understating the problem here. These aren’t easy peasy things.
* Meanwhile, yet another House proposal that has no chance of passage, but could likely wind up as direct mail fodder for the Democrats since it’s quite popular…
People who make more than $1 million per year would pay more in taxes after their incomes reached seven figures under a plan that lawmakers started considering today. […]
The plan would add a 3 percent tax to annual incomes over $1 million and send the money generated to Illinois schools.
Business leaders pushed back, saying the idea would be “another nail in the coffin” for businesses considering leaving Illinois. And he echoed last year’s criticisms of the 2014 referendum as a populist political move.
“It’s an easy vote to say yes to, much like being able to say: ‘Tax somebody else to take care of the problems that we face in this state,” Illinois Manufacturers Association President Greg Baise said.
The House Revenue Committee approved the measure along strictly partisan lines today.
“After New Jersey implemented its millionaires tax, the state itself came out and estimated it lost $2.4 billion of income as a direct result of tax migration,” said Todd Maisch, president and CEO of the Illinois Chamber of Commerce. “We think tax migration is going to be a very big issue.”
“In talking to our members, tax policy is indeed a driver of where they locate,” said Greg Baise, president and CEO of the Illinois Manufacturers’ Association. “This will be another nail in the coffin for job creators who want to stay in the state.”
Baise said the amendment does not address tax policy in a broad manner, something Gov. Bruce Rauner has said he wants the legislature to do this spring.
Currie, though, said the number of millionaires in New Jersey increased after the state imposed a similar tax.
It’s gonna be a heckuva summer unless they can get their acts together right away.
…Adding… Wall St. Journal…
Anti-tax advocates contend that higher taxes on the wealthy lead to millionaire flight. They say this has been seen in Maryland, Rhode Island, New Jersey and New York. The rich are mobile, they say. They can take their money, taxes and jobs wherever they are treated best.
But a new study focusing on New Jersey provides some of the most detailed evidence yet that so-called millionaire taxes have little effect on the movements of millionaires as a whole.
The study, by sociologists Cristobal Young at Stanford and Charles Varner at Princeton, studied the migration patterns of New Jersey’s millionaires before and after 2004, when the state imposed a “millionaire’s tax” that raised rates on those earning $500,000 or more to 8.97% from 6.37%.
The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.
The study dug deeper to figure out whether the millionaires who were moving out did so because of the tax. As a control group, they used New Jersey residents who earned $200,000 to $500,000–in other words, high-earners who weren’t subject to the tax. They found that the rate of out-migration among millionaires was in line with and rate of out-migration of submillionaires. The tax rate, they concluded, had no measurable impact.
* Expert panel criticizes medical care at Illinois prisons
* State tardy on $10 million in funding to U of I Extension