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The harsh reality of irresponsible ideas

Thursday, May 6, 2010 - Posted by Rich Miller

* Gov. Pat Quinn is pushing a sales tax holiday for school supplies this August, just like he did last year. Last year’s plan didn’t go anywhere, and this year’s proposal isn’t looking all that promising, either

With lawmakers days away from leaving town, Gov. Quinn renewed his push Wednesday for a sales tax holiday on school supplies despite the bill’s unknown pricetag and less than resounding support from a top Democratic ally.

Under Quinn’s plan, which advanced from a House panel, consumers would pay a reduced sales tax on school supplies ranging from binders to scissors as well as school clothes retailing for less than $100 Aug. 6-15 — the second-largest shopping season of the year, Quinn said. […]

But Sen. President John Cullerton (D-Chicago) was lukewarm to the idea and said it was unclear whether the state would stand to make or lose money.

“We’re going to need to talk to the retail merchants about that,” Cullerton said, stressing he had not “signed off” on the governor’s proposal.

Bill Brady also shot it down

Brady called the governor’s sales tax holiday proposal “typical populist Pat Quinn rhetoric.” He said a single holiday doesn’t make nearly as much sense an as overall sales tax reduction

Cutting sales taxes when state revenues are way down is not the greatest budget idea I’ve ever heard.

We can argue all day about the tax holiday, and you could make the case that cutting sales taxes across the board during a recession might make economic sense. But cutting off a revenue source when state revenues are drying up makes absolutely no fiscal sense. The state has a responsibility to pay its bills, and - as we all know by now - it isn’t doing so. Making matters worse just isn’t responsible.

* Speaking of “responsible,” you probably know by now what happened to the pension bond bill last night

State budget negotiators are heading back to the drawing board today after a key component of a possible budget compromise fell short in the House Wednesday.

The House put 61 votes on a plan to borrow $3.8 billion that would be used to make required payments to state-funded pension systems next year. However, the plan needs 71 votes to pass.

“I don’t know what else we can do, but we’ll go back to the drawing board,” said Rep. Barbara Flynn Currie, D-Chicago, the bill’s sponsor. “We thought there might have been some Republican votes and maybe that will change. So back to the drawing board.”

Because borrowing money requires a supermajority, so at least one Republican vote is needed in the House to approve the plan. But even some Democrats voted on Wednesday against borrowing money for pension payments.

Patterson summed up the situation quite well

Lawmakers have shown little interest in raising taxes to balance the budget, little interest in dramatic cuts and now appear uninterested in borrowing.

The result could be the state skipping nearly $4 billion in pension payments as part of a fiscal Band-Aid intended to keep the state running for the coming months.

Legislators know that borrowing is a horrible option. It merely kicks the can down the road. But since both parties appear determined to wait until after the November election to do the heavy lifting, then borrowing is the only real recourse. Statements like this one are basically not honest

“It’s the same old thing. We’re just continuing to look at a budget as an instrument of debt rather than a balanced instrument that’s supposed to have real revenue for the expenses,” said Rep. Roger Eddy, a Hutsonville Republican.

When Rep. Eddy is ready to support big cuts to education - his central issue - then I’ll believe he’s being completely forthright about his opposition to borrowing.

And Bill Brady is even more disingenuous because his own fiscal blueprint would absolutely require substantial borrowing. Check out how he tried to deflect a reporter’s question about how he has already essentially admitted that borrowing would have to be a major part of his plan. Brady has said, and repeated it again yesterday, that it’ll take “at least three years” to pay down the state’s deficit. But there is no other way to do that than through borrowing. I’ve set up this video to begin with the reporter/Brady exchange, which is at the 2 minute, 27 second mark. Watch


Brady has proposed a 10 percent across the board cut, which won’t even produce $3 billion. He also wants to cut taxes by a billion dollars, which will make the budget hole that much larger.

They need to find about $6.2 billion to get rid of the structural deficit and another $6.5 billion or so to pay off past due bills. Brady’s plan barely puts a dent in that. If he follows through, he’ll have no choice but to borrow billions of dollars.

The governor’s proposal is mostly a freaking horrible mess. Borrow to pay pensions, defer obligations and borrow on the tobacco settlement. Other components make more sense, including hiking cigarette taxes, implementing a tax amnesty plan and adding to the governor’s power to withhold appropriations (even from mandated programs), renegotiating non-labor state contracts (as Daley is doing) and requiring furloughs.

As unpalatable and even irresponsible as most of that is, I have yet to see any state legislator in either party come up with even a slightly plan that can pass right now. Until they do, borrowing is all they’ve got, because skipping the pension payment would be an utter disaster.

Also, let’s try to avoid silly drive-by comments today. I’ve seen so much “they need to stand up and do what’s right” drivel that I’m pretty sick of it. Forget the bumper sticker slogans and elevate the discussion or find yourself deleted.

* Related…

* Are public employees overpaid? Another study says no

* Quinn, Brady debate who is better ‘cheerleader’ for Illinois

* Quinn criticizes Brady for ‘running down’ state

* Brady calls on Quinn to back Wal-Mart

* Our View: The job’s not getting done

* It’s up to legislators to solve budget crisis

* DuPage Co. peeved: State owes $7 million

* Supporters say cigarette tax hike lacks support

* Police, fire pension changes loom at Capitol

* State playing hot potato with pension burden

* Mental health groups gather at Statehouse to push for funding

* Senate passes bill to end sales tax for water panel

       

65 Comments
  1. - Small Town Liberal - Thursday, May 6, 10 @ 10:08 am:

    Unless I’m misunderstanding, I don’t mind the idea to borrow from the tobacco settlement. From what I gather its not being used as intended anyway, which is unfortunate but a reality. It ends eventually, and its borrowing with a mechanism for repayment already built in. Many other things need to be done to prevent this situation in the future, but I feel like since the money is needed now we might as well pay a penalty on the settlement and borrow against it rather than borrowing from a lender and not having a clue how they’ll be paid back.


  2. - Bill - Thursday, May 6, 10 @ 10:11 am:

    What is there left to say? We have been waiting for a solution for the last 15 years or so and the answer is always wait until after the next election. The problem is that with two year terms for representatives the next election is too soon after the last one so nothing ever gets solved. I suppose more borrowing is the only thing that can pass at this point. Then they can hope that they are in higher office when then can finally hits the end of the road.
    Sometime soon the rating agencies are going to put Illinois in the dumpster. Then, maybe, some federal judge will force them to raise taxes and pay their bills.


  3. - Ray del Camino - Thursday, May 6, 10 @ 10:18 am:

    Maybe the cigarette tax–plus the dumb-but-now-necessary borrowing–will give these clowns the fig leaf they need to limp home for the summer. The major problem is that for many Republicans, opposition to tax increases is not a policy issue, it is part of their identity! It will take the equivalent of a religious conversion for some of these guys to see a different reality than the one they are living in. It is like Reagan refusing to believe that cutting taxes and increasing defense spending would result in a deficit.


  4. - John Bambenek - Thursday, May 6, 10 @ 10:20 am:

    Borrowing from the tobacco settlement builds in another $130M deficit into next year (and subsequent).

    As I read it, we get $300M /yr now… they want to take a partial lump sum which will reduce annual payout to $170M /yr.

    It’s one thing to tread water, but that plan makes it worse. In fact, as I read the framework that’s out there (which included the borrowing which seems to not be on the table now), next years deficit will be around $18-20B.


  5. - wordslinger - Thursday, May 6, 10 @ 10:21 am:

    Don’t let anyone kid you — the state is borrowing plenty, from its vendors and its pension funds. The late payments to school districts and the universities are a form of borrowing as well.

    Anyone harrummphing about the evils of borrowing in the markets is either cynical or ignorant.


  6. - jonbtuba - Thursday, May 6, 10 @ 10:22 am:

    Am I alone in finding it silly that two weeks ago Brady was calling Quinn a member of the “public sector ruling elite” and now he’s calling Quinn a populist? I thought those were contradictory, just like how one cannot be a fascist and a socialist at the same time.


  7. - Small Town Liberal - Thursday, May 6, 10 @ 10:29 am:

    - Borrowing from the tobacco settlement builds in another $130M deficit into next year (and subsequent). -

    Any kind of borrowing builds in more of a deficit. The tobacco settlement isn’t a permanent payment anyway, so the state will have to do without it eventually anyway.


  8. - Bill - Thursday, May 6, 10 @ 10:33 am:

    ==the state is borrowing plenty==
    What you refer to is not borrowing, its stealing. Those of us paying attention know that “late” payment really means “no” payment for whatever agencies they can get away with stiffing. Do you really believe that the UofI, for example, is ever going to get the hundreds of millions that the state “owes” them? They’ll pay them back like they are paying the pension systems back.


  9. - grand old partisan - Thursday, May 6, 10 @ 10:35 am:

    “[Brady] also wants to cut taxes by a billion dollars, which will make the budget hole that much larger”

    Whoa there, Rich. Maybe I’m wrong, but Brady’s plan is to cut tax rates, right? To the extent that this calculates to a dollar amount, it’s a calculation of tax relief on the current volume of economic activity. You seem to be forgetting the rest of the story here. The idea is that lower rates of taxation will spur a higher volume of economic activity. The increased volume compensates for the reduced margin, producing (hopefully) a net gain in revenues, not loss. I say hopefully because there’s no guarantee, of course. But this is not some crazy, voodoo theory – it’s been proven right many, many times.


  10. - not sure - Thursday, May 6, 10 @ 10:36 am:

    just go with the jack franks plan: dont borrow, dont tax, and just take a flamethrower to state government.


  11. - Sueann - Thursday, May 6, 10 @ 10:38 am:

    Every year its the same thing. The entitlment class gets up and whines, the politicians borrow or sell something to give them what they want and life goes on. The state doesn’t have much more to sell and it has borrowed so much that its bond ratings are in peril. Watch though when election time rolls around. Outside of the entitlment class there will be another low turn out once again. I think many do not even realize the mess we are in


  12. - Ray del Camino - Thursday, May 6, 10 @ 10:40 am:

    GOP, I’ve been looking for years for some proof that the
    “lower rates=greater revenue” theory works. One good cite, please? Just one, based on rigorous research, not an assertion about “many, many times.”


  13. - Small Town Liberal - Thursday, May 6, 10 @ 10:42 am:

    - it’s been proven right many, many times. -

    Can you actually document these many, many times? Nationally, it didn’t work under Regan, or Bush Sr., or Bush Jr. Edgar was the last Governor to balance a budget in Illinois, and he didn’t lower taxes, he raised them. So I’m not overly confident in your theory.


  14. - cassandra - Thursday, May 6, 10 @ 10:43 am:

    This may be a bit naive, but don’t these pension funds have trustees? Don’t they have a fiduciary responsibility to the pensioners current and future. Has anyone thought of holding them accountable for sitting silently while all these pension funding shenanigans went on. If they did, of course.

    Our legislators and governors, past and present, don’t like to make cuts if borrowing is available and, surprise, they’re at it again. They’ll keep doing it until the last lender says no. But what might have happened in the past if pension trustees simply said no. Or if labor unions said no. The latter have been talking up a tax increase on the middle class but seem to have done little to stop irresponsible pension holidays and such.


  15. - Small Town Liberal - Thursday, May 6, 10 @ 10:44 am:

    *Reagan


  16. - Bill - Thursday, May 6, 10 @ 10:46 am:

    SLT,
    Say the magic word and win a hundred dollars.


  17. - Brennan - Thursday, May 6, 10 @ 10:47 am:

    Ray del Camino: http://www.youtube.com/watch?v=fIqyCpCPrvU#GU5U2spHI_4


  18. - wordslinger - Thursday, May 6, 10 @ 10:47 am:

    In listening to Brady’s deficit reduction plan, he leaves out a key component.

    Under existing revenue streams, you could go into the capital markets right now and borrow money to pay back vendors and make the pension payment. The markets would scoop up Illinois’ investment grade securities in a New York minute.

    The problem is, you have to pay those guys. Therefore, whatever money is going to the principal and interest on the deficit reduction bonds has to have corresponding cuts in GRF spending.

    No magic beans.


  19. - Rich Miller - Thursday, May 6, 10 @ 10:48 am:

    grand old partisan, name me one large state that has cut taxes by just a billion dollars and has then increased its revenues. One.


  20. - wordslinger - Thursday, May 6, 10 @ 10:51 am:

    I’ve always been confused by this:

    If cutting taxes raises government revenues, wouldn’t the smaller government folks favor higher taxes, and the corresponding decrease in revenue, in order to starve government of funds?

    By their logic, doesn’t lower taxes lead to bigger government?

    Twist!


  21. - Pot calling kettle - Thursday, May 6, 10 @ 10:53 am:

    ==The idea is that lower rates of taxation will spur a higher volume of economic activity. The increased volume compensates for the reduced margin, producing (hopefully) a net gain in revenues, not loss. I say hopefully because there’s no guarantee, of course. But this is not some crazy, voodoo theory – it’s been proven right many, many times.==

    It’s been proven right in theory, but wrong in practice. The budget deficit of the federal government jumps every time the a revenue-boosting tax cut is passed.

    The last thing the State needs now is a tax cut. Rep after Rep stood up yesterday during the debate and supported HB 174. They all know what we need, but not enough of them are actually willing to support it.

    It sure feels good to believe that a cutting taxes is the fix for everything, but it’s not. It’s time for people to pony up for the services they expect.


  22. - Pot calling kettle - Thursday, May 6, 10 @ 10:54 am:

    Clarification: The Reps were supporting HB 174 while debating school vouchers.


  23. - Responsa - Thursday, May 6, 10 @ 10:54 am:

    It’s the narrative, people. Why should voters and even legislators be expected to feel the urgency when the governor himself is offering ideas for a sales tax holiday in the same breath he is crying for an income tax increase and more borrowing to “keep the state afloat”. Does he not understand that most people truly can figure out that shell games and shiny objects are a big reason why we are in the position our state is in–and know that if they don’t pay sales taxes for certain things in August they will just have to pay more taxes somewhere else? The sales tax holiday is a shiny object and is small potatoes, (as folks here argue often about other things) but it’s the narrative that’s messed up. And GA, stop the damn free rides for seniors, already!!


  24. - Robert - Thursday, May 6, 10 @ 10:54 am:

    just wanted to say, terrific post, Rich, from top to bottom!


  25. - MikeMacD - Thursday, May 6, 10 @ 10:55 am:

    The problem with supply side tax policy is that zero times any number is still zero. At 3% income tax rate, Illinois is pretty close to zero now.


  26. - hawksfan - Thursday, May 6, 10 @ 11:03 am:

    If the Laffer Curve had ever proven successful, budget deficits at the federal level would be long gone. Unfortunately what looks great on a napkin doesn’t always work out so well in the real world.


  27. - Linus - Thursday, May 6, 10 @ 11:03 am:

    – just take a flamethrower to state government –

    … Meaning, public education (pre-K through higher ed), mental health programs, services for elderly and the disabled, public safety programs, etc. Because that’s what more than 90 percent of “state government” is, is supports for those areas.

    That’s a great idea: We’ve nearly immolated it all, already, through FY10 cuts and payment delays. Let’s finish it all off! Why beat around the bush any longer?

    Setting aside the snark - it seems that, beyond maybe the cig tax and tax amnesty options, everything else either increases payment delays (guaranteeing more “cuts” by programs that must fold over time) and/or digs the hole far deeper (through debt service on borrowing, or pushing-off obligations to pension contributions further).

    What we wind-up with is a budget that perhaps pretends not to “cut” a lot of things, or minimizes budget-line-by-line “cuts” - but is ultimately far more damaging than it would be to simply increase general taxes, to begin to deal with today’s problems with today’s dollars in a straightforward, no-BS fashion. No gimmicks, no payment-delay cuts hidden off the ledgers, etc.

    A plea to state leaders: Please act like adults, and treat us, the voters, like we’re adults. Quit treating us like little kids who can’t understand or see what’s really going on.


  28. - Cincinnatus - Thursday, May 6, 10 @ 11:03 am:

    Pot/Kettle said:

    “It’s been proven right in theory, but wrong in practice. The budget deficit of the federal government jumps every time the a revenue-boosting tax cut is passed.”

    True because each time the tax was cut, revenues increased, and legislators spent WAY MORE than before the tax cut. The real problem is spending, not tax rates.

    It is time to treat the state as one would a bankrupt private entity. New agreements with lenders, pensioners, employees, reduce services to core governmental responsibilities, then perhaps a 2-year TEMPORARY, sunsetted/non extendable tax increase. This along with the inevitable upcoming economic recovery (If Washington would get out of its way) should get the state out of its problems.

    Finally, some constitutional amendments concerning spending (I hate amendments, but the GA is not responsive to their constituents).

    A quick trip to our neighbor’s web site could help the chuckleheads in Springfield: http://www.in.gov/sba/2447.htm


  29. - Earnest - Thursday, May 6, 10 @ 11:05 am:

    Bill @ 10:11 am touched on something that’s been on my mind as I try to imagine a way out of this mess that doesn’t involve magic beans or having to rebuild out of a dark age after the state has economically collapsed. Is this situation truly and actually hopeless at this point from a political perspective? Or will the aftermath of the elections result in representatives who will actually cut spending and/or increase revenue?

    If it is hopeless from a political perspective then it seems that the only other option to get the state to change course is legal pressure. Should we turn our energies towards discussion of what legal tools are available to force Illinois to make more responsible choices?

    I’m not suggesting, I really am asking. I am not knowledgeable nor experienced in comparison with nearly all commenters, but have had this on my mind and would like to elevate the level of my own contemplation.


  30. - wordslinger - Thursday, May 6, 10 @ 11:09 am:

    –The entitlment class gets up and whines–

    Who is that? Schools, roads, universities, hospitals, prisons, state troopers, etc.

    Do you live in the woods, self-educated, foraging for sustenance, fighting off the banditos yourself? Are have you had occasion to avail yourself of these services?


  31. - Rich Miller - Thursday, May 6, 10 @ 11:10 am:

    Cincinnatus, I ask again to confine this tax cut magic pony discussion to states, not the federal government. You tell me how a $1 billion tax cut in a $500 billion Illinois economy is going to spur so much activity that we’ll get back more than a billion dollars.


  32. - jonbtuba - Thursday, May 6, 10 @ 11:24 am:

    North Carolina seems a good refutation to this “lower taxes=higher revenue” argument. The state raised taxes in 2001, and from 2001-2007 it ranked 3rd in new revenue generated from interstate migration and also had the 3rd-highest amount of new residents. It also made a ton of money that the state could reinvest in-state.

    Cincinnatus and his brethren do not have a single empirical example from any state to suggest otherwise.


  33. - grand old partisan - Thursday, May 6, 10 @ 11:33 am:

    From 2003 to 2008, New Mexico lowered its state personal income tax in steps from 8.2% (2002) to 4.9% (2008). Over the same period, revenue from personal income tax collections fact grew from $923 million in 2003 to $1.186 billion


  34. - Cincinnatus - Thursday, May 6, 10 @ 11:35 am:

    Rich - I am not saying Illinois should cut taxes at this time, although that is my predisposition. Indeed my response indicates that I would support a TEMPORARY tax increase. I am merely trying to explain to Pot/Kettle, who brought the issue up, why deficits increase when tax rates are cut, e.g. the increased revenue flow to the government allows legislators to spend even more money than they should. Eventually, an economic downturn occurs and tax revenues cannot keep pace with the increased rate of expenditures made by shortsighted politicians. But just looking at taxes decreases and their revenue effects, when a tax is cut the revenues increase, as Jude Wanniski and Art Laffer predict.

    At the state level, we can look at business taxes and other costs of doing business in the state (sales/property/income taxes). Since businesses act in their own best interests, one can conclude that any state-wide effort to reduce the cost of doing business would cause more businesses to be created (or existing business to migrate). So one can argue that reducing a business tax would cause more business activity in the state, and increased tax revenues paid by individuals. Similarly, INDIVIDUALS also act in their best interests, so any attempt by a state to reduce its cost of living should attract individuals to the state, along with the synergies they bring.

    Back to my original post, and outside of any tax reduction strategy (which as much as it pains me I cannot support for Illinois at this time), I am making the point that the cost of Illinois government is unsustainable, with or without tax increases. The whole system costs to much, and I propose every element of state expenditures be cut. That includes Education (like your Mom, I am a former teacher - certified), Pensions, Public Services, everything.

    Special interests and legislators define “critical services” when it comes to state expenditures. I say, nonsense. One poster notes that the budget deficit will be worse next year than this. I think he is right. Unless the state is treated as being in bankruptcy, there is no way spending can be brought under control. There is no amount of taxes that can be raised to provide the revenue for the profligate spending in Springfield.

    As I have been preaching for years, the problem ain’t taxes, it’s spending.


  35. - This Little Piggie - Thursday, May 6, 10 @ 11:38 am:

    How about the state cigarette tax? That has been climbing for years, and every time it goes up, revenues from it fall.


  36. - Rich Miller - Thursday, May 6, 10 @ 11:44 am:

    GOP, you left out 2009. I wonder why… http://albuquerque.bizjournals.com/albuquerque/stories/2010/03/22/daily15.html


  37. - TaxMeMore - Thursday, May 6, 10 @ 11:45 am:

    If the GA forced Cook County to cut its cigarette tax from $2/pack to $0.50/pack, I think the state could see its tobacco tax revenue go back up by $80-100 million. And it certainly won’t hurt the sales tax revenues either.

    The cig tax proposal they have now is also irresponsible and should be included on this list. There is no way its bringing in $300+ million next year, let alone the next two years. That revenue projection is a bad promise that they will spend anyway but will come due next year. Cook County doubled their cig tax from $1 to $2/pack, just like the state will, and what happened there?

    What is Cullerton, and our state, going to do when the cig tax doesn’t bring in the revenue next year he is promising? What is the impact 5 years down the road of this Quinn/Cullerton cig tax hike, versus forcing Cook to cut their tax gouging rate and slowly increasing the state cig tax starting with an increase from $0.98 to $1.10? They really shouldn’t be copying Cook County’s bad economic policies in Springfield.


  38. - Cincinnatus - Thursday, May 6, 10 @ 11:45 am:

    Good point, Piggy.

    Simple economics, if you want less of something, raise its cost. If you want more of something, lower its cost.

    Increases in cigarette taxes will cause people in border communities to get their smokes across state lines, others to quit, or worst of all, an illegal market to thrive. All three of those things cause the revenue to go down. Economics plus the law of unintended consequences prevail.

    If the proponents of increased cigarette taxes are increasing the tax because of betterment of the commonweal, that’s one thing. To increase taxes for economic reasons is nonsense.


  39. - Small Town Liberal - Thursday, May 6, 10 @ 11:48 am:

    - What is the impact 5 years down the road of this Quinn/Cullerton cig tax hike, versus forcing Cook to cut their tax gouging rate and slowly increasing the state cig tax starting with an increase from $0.98 to $1.10? -

    Hopefully decreased Medicare/Medicaid costs, revenue increase isn’t the only goal.


  40. - TaxMeMore - Thursday, May 6, 10 @ 11:48 am:

    In 2004, Illinois tobacco tax revenues were $760 million. In 2009, they were $562 million. That is $178 million less per year.

    The Cook County and Chicago cig tax hikes happened in there and obviously cost the state revenue. That’s not even looking at the sales tax involved either.


  41. - Pot calling kettle - Thursday, May 6, 10 @ 11:55 am:

    ==True because each time the tax was cut, revenues increased, and legislators spent WAY MORE than before the tax cut.==

    At a very basic level, expenses would be expected to increase due to inflation. At a realistic level, legislators increase expenditures at the behest of their constituents. (That’s why they cut taxes as well.)

    ==Since businesses act in their own best interests, one can conclude that any state-wide effort to reduce the cost of doing business would cause more businesses to be created (or existing business to migrate).==

    Taxes are not the only cost of doing business. If a state has poor services and infrastructure, additional costs are then borne by businesses to make up for what the state isn’t providing. For example, if the roads are in disrepair, the business might see increased maintenance costs for its fleet. If the schools are underfunded, it may pay more in property tax or have to pay its workers more so they can afford private schools. If there are not enough police, insurance costs will go up as will expenses for security measures.


  42. - Rich Miller - Thursday, May 6, 10 @ 11:56 am:

    The tobacco tax is a clearly punitive tax, unlike the income or sales tax. So, of course reducing it will bring in more revenues because it’s already designed to be so high that it greatly reduces consumption. It’s apples and coconuts.


  43. - Pot calling kettle - Thursday, May 6, 10 @ 12:03 pm:

    I would like to think the primary intent of a cigarette tax is to reduce smoking, especially among young people. And that’s exactly what happens. The long-term benefit will be large (and difficult to quantify).

    The best revenue source for the state is an income tax with EIC for low wage earners. People should pay for the services they expect to receive.


  44. - Cincinnatus - Thursday, May 6, 10 @ 12:04 pm:

    Pot/Kettle:

    Agreed. So the issue is really the proper role of government and its costs to taxpayers. Are all of the expenditures made by Springfield necessary, or are there areas that are only funded because of high revenue times? What are the priorities in Springfield. These existential questions need to be answered.

    Going back to my original post, I think that all of the expenditures of the past 10 years need to be looked at through a new reality which says that no amount of tax increase will provide sufficient revenue stream for this state, now and in the foreseeable future. Given that, the state should consider itself in bankruptcy which would give it the authority to look at ALL expenditures, even those currently under contract.

    Choose any specific tax and take it to the limit that would not cause rioting or be deemed illegal by the courts. Raise the tax to that level. Do you really believe that is enough money for the black hole that is Springfield spending? Will that amount of spending satisfy the Daley machine and its backers in the Capitol?


  45. - TaxMeMore - Thursday, May 6, 10 @ 12:06 pm:

    “Hopefully decreased Medicare/Medicaid costs, revenue increase isn’t the only goal.”

    I think you mean that this will lead to increased Medicare/Medicaid costs when fewer smokers live many years longer but still need the same kind of end of life treatments at the same cost just a few years later. Not to mention fewer smokers dying before they reach the age of eligibility. Handing out filterless cigarettes to every state pensioner would save us billions down the road, maybe we should try that social engineering also.

    The goal is to control other people’s behavior who are doing something you don’t think they should do. There are always huge problems when that happens. At $10/pack with more than $6/pack in taxes in Chicago after this passes, some convenience store worker is going to get shot when thugs try to make off with a product worth tens of thousands of dollars more because of the taxes. Kentucky cigarette delivery trucks are going to need armed guards to keep street gangs from hijacking them so they can make $5/pack on the streets. But you might save some medicare costs in 20 years and bring in a few more dollars next year, so the increased crime is worth it.


  46. - TaxMeMore - Thursday, May 6, 10 @ 12:07 pm:

    Rich, you are correct, apples and coconuts. Just taking the opportunity because they were both food.


  47. - VanillaMan - Thursday, May 6, 10 @ 12:11 pm:

    New Jersey is ahead of us in all of this by a year, and I have been watching and reading how well Governor Christie is doing. He doesn’t care about the polls, he isn’t interested in being a professional politician, and is constitutionally powerful enough to do what an Illinois governor can’t do. If there is a test tube case out there for us to watch - it is this one.

    I don’t care how we get out of this mess, but I want to get out of it without destroying our future. Tax increases are poisonous and should be avoided whenever possible. We have too much and have to downsize governmental responsibilities. The very idea that a STAR bond could be considered demonstrates an illness within our current politico and it’s severe disconnect with reality.

    As to New Mexico, GOP is right. When Governor Johnson was in office, he was a brilliant governor, lowering taxes, cutting government, and demonstrating a first rate understanding on how to make government work in the 21st Century. And yes, he lowered taxes and raised revenue. Rudy Giuliani did the same thing. So did Reagan. So did Clinton. Keynesian economics never worked, and it is high time to bury it. New Mexico’s Johnson is a free market liberatarian.

    Now that he is gone, you see how well the good times lasted - the next governor jumped right back to the obsolete way of governing, and now the state is back off track and suffering more than it would have under Johnson.

    So, I have a preference here. No new taxes while the current government is in power. These people are out of their minds and remnants of the 1970’s way of governing.


  48. - Rich Miller - Thursday, May 6, 10 @ 12:15 pm:

    ===New Jersey is ahead of us in all of this by a year===

    Yeah. He just skipped his pension payment.


  49. - Tax? - Thursday, May 6, 10 @ 12:22 pm:

    Has Brady said he would cut the income tax rate?

    Illinois is the only state that has both a fuel tax and a sales tax on fuel and truckers know it they fill up before they get here.

    Illinois has a $2000 permit fee per truck other states don’t I wonder why all the trucking companies left.

    I think it depends on the the tax cut on whether it would increase revenue.


  50. - Rich Miller - Thursday, May 6, 10 @ 12:23 pm:

    Just to point out a bit of hard reality here. If you cut state taxes on business by $1 billion, the cut would need to generate $15 billion or so in taxable net business income or $28 billion or so in taxable net personal income to just break even.

    What $1 billion tax cut in a $500 billion state economy is gonna do that?


  51. - Bubs - Thursday, May 6, 10 @ 12:46 pm:

    Is there an n Illinois politician out there who has the guts God gave geese?

    The people (or most of them) understand by now that the State is fiscally broken. They are less interested in blame games than in hearing what can be done. The challenge is not this year, but the next ten years, and more like 20 to address the pension issue.

    The State government needs a fundamental reassessment of its various roles of provider of services, business stimulator, and social agency.

    I was hoping this election would provide a debate on that more basic issue, with discussion of plans that faced the issue squarely on a long term basis, rather than stop-gap provisions to cover our butts for this year. I was hoping for a leader to tell us that yes, the next years are going to be austere “at best,” but that a plan is in hand so that it will only last a few years, as Illinois substantively addresses this fiscal catastrophe.

    Still hoping.


  52. - Cincinnatus - Thursday, May 6, 10 @ 12:50 pm:

    Rich-

    Yup. And led a state-wide effort to get education budgets under control with about 55% or the school district referenda going down to defeat.

    Bottom line is that expenditures, be they salaries or benefits, cannot keep automatically increasing while revenues fall. Anyone who runs a business knows this simple fact.

    There is a structural deficit in Illinois. The current budget is 10% higher than last year (which itself was $4 billion in the red) on projected revenues that are LESS than the revenue last year. Why? If you ran your business that way, or handled your personal finances in a similar manner what would happen? Yet we taxpayers allow it to happen in Springfield.

    It’s time to rethink everything.

    Why should any state employee have a fixed-benefit retirement program? Many businesses eliminated them for new employees in the mid-80’s. Why not institute a program to stop fixed-benefit programs for new employees and replace them with fixed-contributions?

    Why should state employees contribute less to their healthcare than private sector employees?

    I am tired of hearing the canard that we must get the best and brightest to work in government. That was true when government pay was two-thirds that of the private sector, but public sector employees reached parity long ago. Why do public sector employees consider themselves more enlightened and somehow better than the public at large? What kind of conceit is that?

    How many “bridges to nowhere” are being built at the expense of infrastructure repair?

    Why can ComEd offer the government a half billion dollars instead of improving their infrastructure?


  53. - Vole - Thursday, May 6, 10 @ 12:54 pm:

    Judicious cuts and tax increases now might still keep the lid on this monster. Delaying too long will almost certainly ensure an overshoot, damaging our economy, social cohesiveness, and at least some of the base for the progression of our educational, cultural and environmental values that government helps to sustain. “Drowning the baby in the bath water” makes for good rhetoric but in the long run (fast approaching) it means dead baby and a degraded populace. We are on the edge, or maybe over. Strict adherence to ideologies about taxation does not make our future brighter in this particular time. It almost guarantees failure.


  54. - Tom Joad - Thursday, May 6, 10 @ 1:39 pm:

    All these proposals don’t add up to enough to balance the budget. Since the legislature won’t vote for a tax increase until after the election, if at all, the only things left are minor excise tax increases, major cuts and gimmicks with state employees.
    If Quinn is given the power that the legislature won’t exercise to make cuts, a six month budget is passed and the legislators pass the borrowing plan, you have a way to get out of town. If there is no borrowing, then the bond rating goes lower, perhaps to junk bond status.
    You can’t force the legislature to be responsible while in session, only by extracting promises for a tax increase leading up to the election by their big supporters.


  55. - Small Town Liberal - Thursday, May 6, 10 @ 1:41 pm:

    - Why can ComEd offer the government a half billion dollars instead of improving their infrastructure? -

    Because there is no significant competition. This bribe was an attempt to sidestep the ICC, the only thing standing in the way of utilities charging whatever they want.


  56. - Reality Check - Thursday, May 6, 10 @ 1:55 pm:

    @Cincinnatus, try inserting a few facts into your right wing ideology crazed cranium:

    It’s time to rethink everything. Why should any state employee have a fixed-benefit retirement program?

    Because they are cheaper to the state than paying FICA tax and 401k match.

    Many businesses eliminated them for new employees in the mid-80’s.

    Not many large employers did. The state and universities are very large employers. 3/4 of the Fortune 500 have pension plans. They achieve very significant economies by not paying Wall Street firms big overhead to manage 401k plans.

    Why not institute a program to stop fixed-benefit programs for new employees and replace them with fixed-contributions?

    Because that would be more expensive than the status quo.

    Why should state employees contribute less to their healthcare than private sector employees?

    Health benefits are part of total compensation, which is collectively bargained. If state and university employees wish to give up wages in exchange for more affordable health benefits, the end result makes no difference to the employer’s cost.

    I am tired of hearing the canard that we must get the best and brightest to work in government. That was true when government pay was two-thirds that of the private sector, but public sector employees reached parity long ago.

    In fact, private sector pay outstrips state and local government pay by 11 and 12% respectively nationwide, and even more in Illinois, where private sector workers are paid 12.5% more than comparable state employees and 13.5% more than local employees.

    Factor in benefits and comparable private sector workers still receive more in total compensation by 7%.


  57. - Springfield Sceptic - Thursday, May 6, 10 @ 2:06 pm:

    Cincinnatis, you said: That was true when government pay was two-thirds that of the private sector, but public sector employees reached parity long ago.
    Obviously you didn’t read the short about public sector employees making less that private sector employees. Case in point: I looked up what my position in the private sector pays and what I currently make. I am paid $19K LESS than the bottom of the range of salary for a similar position. Health care contributions will move that number somewhat but it will still not even approach the private sector number.


  58. - Cincinnatus - Thursday, May 6, 10 @ 2:39 pm:

    Shall I even comment on the ad hominem attack? Oh wait, I just did.

    While the cost per hour is higher for defined contribution programs is slightly higher, the overall cost of defined contribution programs are lower and more predictable for the employer according to the Bureau of Labor Statistics March 2009 report. In 2005, the cost to employers for both programs was equal.

    The BLS also indicates that defined benefit plans hover around 20% of workers while defined contribution plans are at least double that rate.

    While initial costs may be lower for FICA, early retirement from the government and increasing lifespans may result in overall higher costs to the state.

    Some may consider a 7% difference a parity, especially considering the job security and other benefits offered by a government job. Of course, the whole job issue really is one of choice. Government workers CHOOSE to be government workers. If one does not like the conditions of employment, choose another line of work.


  59. - D.P. Gumby - Thursday, May 6, 10 @ 3:15 pm:

    Risking Rich’s wrath, it seems that there is a major “philosophy of government” issue. I believe former Sen. and Def. Secy. Wm Cohen said: “Government is the enemy until you need a friend.”
    The debate about taxes, pensions and business practices is circular and varies depending on one’s perception of the importance of government and government services. Cincinnatus sounds like a true economist in saying that state workers can leave if they don’t like it–reminiscent of the old “primacy of contract” theories back at the end of the 19th Cent. and up to the 1930’s that a corporation and a worker had equal bargaining position and therefore all worker protection laws were unconstitutional. Workers, no matter where they are, can’t just “choose another line of work”. There’s talk about how Ill taxes are too high and state not run as a business, but what other businesses have not increased prices (income tax rates) in ten+ years?? Finally, if there was not the increased red meat rantings of the radical right, would those in the GA be acting more reasonably? Blago’s gone, but is replaced by the T-baggers. One crazy replaced by many.


  60. - grand old partisan - Thursday, May 6, 10 @ 3:50 pm:

    Rich - I’m pretty sure NM was facing the same sort of dismall unemployment numbers in 2009 that most states faced. So, yeah, their revenue from income tax dropped dramatically. If they had pre-cut level rates in place that year, they would have collected more - IF you assume the employment numbers remain a constant between the scenarios. I’d argue that you can’t assume that. I’d argue that the employment situation would have been worse if those who still had jobs were paying higher rates of income tax, in which case revenues would have dropped even further than they did - meaning the tax cuts were still acting as a net positive.


  61. - steve schnorf - Thursday, May 6, 10 @ 4:51 pm:

    I rarely bother to argue with people who appear ill-equipped to compete, but Cincinnatus (whoever you are, brave anonymous soul) you just effectively conceded Reality Check’s point. Defined benefit programs do and have hovered around 20% of the work force and that’s because the number of them among very large heavily unionized employers has for all practical purposes not changed in years.

    Yes, defined benefit programs have been disappearing at JoeBob’s Bait Shop and Transmission Repair, and lets of small and medium sized business across the country. But Illinois is a very large (number of employees) heavily unionized employer. Tell me all the places that defined benefit plans have disappeared among heavily unionized employers with 100,000 or more employees. I’m waiting.

    So few other wise reasonably intelligent people on here seem to accept the fact that this is not a right-to-work state, ain’t gonna be in my lifetime, public employees have been authorized to organize and bargain collectively since the 1970s. If you can’t live with that, move to Arizona or Mississippi. Ask Bill Brady if he would sign a right-to-work bill. Our past 3 R governor’s made it clear they wouldn’t, but maybe Bill would like to give the otherwise p____d-off public workers one more reason to hold their noses and vote D.


  62. - Cincinnatus - Thursday, May 6, 10 @ 5:41 pm:

    grand old partisan,

    I refer you to my first post where I say that drastic cuts in spending along with a tax increase (temporary with strict sunset limit) are the only way for Illinois to have a chance of overcoming its systemic financial problems. You may use a derogatory term to describe me, but I would say anyone who doesn’t embrace such a position is not facing up to the problems in Springfield, or lives in a world of unicorns and rainbows.


  63. - 47th Ward - Thursday, May 6, 10 @ 5:42 pm:

    GOP,

    I think your argument (that New Mexico’s tax rate cut created a net increase in taxes collected) has a major flaw.

    Between 2000 and 2009, New Mexico’s population increased by more than 10%. I suspect the increase in tax receipts had more to do with more tax payers than simply a reduction in the rate.

    On the other hand, if you can demonstrate that lower tax rates were the primary cause of the population growth, then I’ll concede your point. In my opinion, the weather had more to do with the population growth than the tax rate reduction.

    They really should call it the Laugher Curve.


  64. - Cincinnatus - Thursday, May 6, 10 @ 5:42 pm:

    Sorry grand old partisan, I meant to direct my comments to DP Gumby.


  65. - Anonymous - Thursday, May 6, 10 @ 8:12 pm:

    I am not a parent and I am not a student, so how will the tax amensty benefit me? It’s rather exclusionary, and since it doesn’t benefit all or probably even most Illinoisians it should have never been offered up, or passed in either chamber of the General Assembly, in the first place, not to mention that the fact that it is a STUPID idea under our state’s current financial situation.

    After recent news stories about democrats (e.g., Madigan, Cullerton etc) and just from what I have observed of them over the last several years, I have become increasingly disappointed with them. I am glad that I had the foresight to pull a republican ballot in the primary. I predicted that Obama in ‘08 would be the last time I would be the LAST time that I would vote for a democrat, and looks like I’ll have no qualms about sticking to my words.

    I am 100 percent + disgusted with democrats, and won’t vote for any ever again! The people in the U.K. got it right today and I hope Illinoisans get it right in November.

    I be voting for Brady, as a protest vote. I’ve simply had enough of the democrats,especially the Chicago democrats who have ruined this state.


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