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Illinois not joining 16 other states in a sales tax holiday this month as federal revenues drop $1 billion

Thursday, Aug 4, 2011

* There won’t be another back to school sales tax holiday in Illinois this year. Iowa is about to hold its 11th annual holiday on sales taxes for clothing and footwear. Missouri is also having a tax holiday soon. Time Magazine has more info

At least 16 states are hosting tax-free shopping events in the near future, including 11 states waiving sales tax on many purchases this weekend: Alabama, Arkansas, Iowa, Louisiana, Missouri, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, and Virginia. Other states—Connecticut, Florida, Maryland, Massachusetts, Texas—hold their tax-free weekends later in August.

More details about each state are here.

* The Northwest Herald wonders if the lack of an election is the reason for no repeat performance in Illinois this year

The governor has said nary a peep about it, because the Illinois General Assembly didn’t reauthorize the tax holiday. Frankly, we don’t recall the governor pushing very hard for a reauthorization, either.

What’s different in 2011?

The economy still isn’t very robust.

Families still are struggling to make ends meet, and back-to-school shopping remains “expensive and difficult,” to use Quinn’s words from last year.

Besides, the state has had a hefty chunk of new money coming in since January, after the Legislature approved and Quinn signed big increases in income tax rates for individuals and businesses.

So, you’d think it would have been even easier this year than last for the state to give back-to-school shoppers a temporary sales tax break.

The cynic might point out that last year was an election year, and this year isn’t.

But surely that wouldn’t be the reason the governor and Legislature forgot all about extending the sales tax holiday in 2011.

Would it?

* And Sen. Toi Hutchinson didn’t completely dispute that angle during a talk with Phil Kadner

State Sen. Toi Hutchinson (D-Olympia Fields), who was a sponsor of the original tax holiday bill, told me Wednesday that Illinois simply can’t afford such generosity this year.

“We have $8.7 billion in unpaid bills,” Hutchinson said. “We’ve made unprecedented cuts in the state budget that are very painful.

“As much as I would like to help families and schoolchildren in Illinois, this is simply something the state cannot afford to do this year.”

I noted that last year the state was not only drowning in red ink, but had yet to pass a 67 percent income tax hike. Still, the Legislature thought the sales tax holiday was a good idea.

“Sometimes you do things for political reasons that are not good public policy reasons,” Hutchinson said.

I give Hutchinson high marks for honesty. Most politicians wouldn’t have answered that question in such a direct manner.

“When they (legislative leaders) came to me last year and asked me to carry this bill, I thought it would be a good thing to do to help people who were struggling in this economy and had children in school,” Hutchinson said.

“I have since learned a lot more about the budget process, and as much as I would like to help people with children in school again this year, it just doesn’t make sense.”

* I’m probably excerpting too much from Kadner’s column, but he has more that’s of interest

Susan Hofer, spokeswoman for the Illinois Department of Revenue, said the state estimates that consumers spent $323 million on school supplies during last year’s 10-day tax holiday, for a sales tax savings of $16 million.

That’s far short of the $60 million in savings some politicians were predicting when the bill waiving the 5 percent state share for sales tax for school supplies passed.

As for the business stimulus the legislation was supposed to create, Hutchinson said, “After studying some of the figures on tax holidays, I’m not sure people spend more. I just think it impacts when people spend instead of how much they spend.”

Gov. Pat Quinn originally predicted $40-60 million in savings.

Thoughts?

* Meanwhile, the state is losing out on big federal bucks this fiscal year

The end of the federal stimulus program and changes in Medicaid payments will cost Illinois more than $1 billion this fiscal year compared to last, says an analysis from a state economic-forecasting commission.

‘We knew this was coming,” said Jim Muschinske, revenue manager for the Illinois Commission on Government Forecasting and Accountability.

The commission’s July revenue update estimated the state would receive $4.530 billion in federal transfers for the fiscal year that ends June 20, 2012. The estimate compares to $5.386 billion received in the previous fiscal year.

Muschinske said a 60 percent federal reimbursement rate for state Medicaid costs returned to 50 percent after the economic-stimulus program expired. The state’s decision to stretch out payments to Medicaid providers in the current fiscal year also will reduce the amount eligible for federal reimbursement, he said.

* Related…

* Governor’s office announces homebuyer down-payment assistance program

* Illinois notifies seniors eligible for free rides

* Yearly tab for Ald. Burke’s bodyguards nearly $600,000

- Posted by Rich Miller        

17 Comments
  1. - How Ironic - Thursday, Aug 4, 11 @ 8:31 am:

    I think the ‘tax holiday’ idea is foolish, and doesn’t spur additional spending. As pointed out, it simply shifts buying for goods that would have been purchased otherwise to a few days where the state doesn’t get any revenue.

    Similar to politial talk when gas prices climb about a $.05/gallon ‘tax’ savings. It’s stupid.

    If the state was flush with cash, and all bills were current, then perhaps it might make some sense. But until then, it’s a dumb idea.


  2. - Sam I am - Thursday, Aug 4, 11 @ 8:44 am:

    The Burke story ruined my morning.


  3. - Bonsaso - Thursday, Aug 4, 11 @ 8:59 am:

    Maybe someone could run against Burke by saying how much they could save the city.


  4. - Wumpus - Thursday, Aug 4, 11 @ 10:39 am:

    Fine, I am going to drive to Indiana or Wisconsin to celebrate in their tax holidays! I don’t care if gas is $4 gallon!

    These holidays are silly.


  5. - zatoichi - Thursday, Aug 4, 11 @ 10:56 am:

    Illinois is #50 on the national net asset poll and it seems like a good idea to cut some revenue. A small tax vacation feels good today, Later we can cut some funding that will eliminate jobs because there is not enough cash to pay the bills. Excellent, Smithers!


  6. - Metro East Transplant - Thursday, Aug 4, 11 @ 11:56 am:

    I agree the holiday tax will not spur any additional spending. The required items on my 8th graders school supply list + a lunch box totaled $160 alone. No money left to additionally spend.


  7. - Cincinnatus - Thursday, Aug 4, 11 @ 11:58 am:

    Rich said,

    “But surely that wouldn’t be the reason the governor and Legislature forgot all about extending the sales tax holiday in 2011.

    Would it?”

    It’s not an election year…

    Re: Medicaid reduced funding.

    Does it make sense to revisit AllKids yet?????


  8. - Hunterdon - Thursday, Aug 4, 11 @ 1:37 pm:

    re:
    Governor’s office announces homebuyer down-payment assistance program

    Has Quinn lost his mind!?
    Isn’t this program exactly what was going on a few years ago on the federal level that played a huge part in our current economic mess?
    Illinois cannot afford to front down payments for low income people to buy homes they really can’t afford in the first place. It was a financial disaster on the Federal level and it will be the same for Illinois. What is Quinn thinking?


  9. - Cincinnatus - Thursday, Aug 4, 11 @ 2:39 pm:

    - Hunterdon - Thursday, Aug 4, 11 @ 1:37 pm:

    “Has Quinn lost his mind!?”

    You can’t lose what you never had…


  10. - Ghost - Thursday, Aug 4, 11 @ 2:52 pm:

    Lets just do a sales tax holiday rememberance day.


  11. - mcbroke - Thursday, Aug 4, 11 @ 3:06 pm:

    I cannot believe what I’ve read about “Smart Move” the gov’s new program to provide up tp $6000.00 toward the purchase of a home……….for those who may not have enough for the downpayment……..or other incidentals like appliances. In Sangamon county, a household may have up to $81+k income to purchase a home up to $247,000.00. what? Can this be correct?

    But what really slays me is that the $200 million program will serve 1300 households. Let’s see….$200 million divided by 1300 households =
    $153,846.00. But the maximum given each household is $6000.00. Where is the remaining $147,846 [x 1300} or $192+million going? Overhead?

    I must surely have my figures wrong.


  12. - zatoichi - Thursday, Aug 4, 11 @ 4:04 pm:

    mcbroke,
    Your figures are right out of the article. Twist it another way, at $6,000 a home they could provide financial help to 33,333 homes compared to the 1,300 target in the article. If they gave me $6,000 to help pay off my home, I could then spend the extra money in the local economy helping our local businesses. Now that would be a ‘Smart Move’.


  13. - Phineas J. Whoopee - Thursday, Aug 4, 11 @ 4:07 pm:

    MCbroke, they must be funding the entire loan.

    There seems to be a mad race to get taxpayers to pay for any and every social service any goo goo can think of even while our economy raises toward bankruptcy.

    My favorite is breakfast served in the classroom. Families get free lunches, food stamps (theoretically to buy food) and breakfast. I’m sure there is after school programs where snacks are served as well. Where do people think the money is going to come from?


  14. - Rich Miller - Thursday, Aug 4, 11 @ 4:16 pm:

    Yes, complain about school breakfasts. Great. Go with that. Sheesh.


  15. - wishbone - Thursday, Aug 4, 11 @ 5:58 pm:

    +1 “Yes, complain about school breakfasts. Great. Go with that. Sheesh.”


  16. - wishbone - Thursday, Aug 4, 11 @ 7:42 pm:

    “It’s just where do you stop?”

    How about we stop giving agricultural subsidies to millionaires like Michele Bachmann?


  17. - wordslinger - Thursday, Aug 4, 11 @ 10:59 pm:

    Here, I hope, are some common-sense and obvious observations based on a lifetime of experience and history:

    –The required items on my 8th graders school supply list + a lunch box totaled $160 alone. No money left to additionally spend.–

    Don’t buy them. I tossed the required list by the time my first (trainer) kid hit third grade. They don’t use half that junk on the list. Get it when they need it and don’t take the big hit up front.

    –My favorite is breakfast served in the classroom. Families get free lunches, food stamps (theoretically to buy food) and breakfast–

    That old Bolshevik, Winston Churchill, said:

    “There is no finer investment for any community than putting milk into babies.”

    Short and perfect. I’ll leave it at that. The dude had a way with expressing universal truths in the English language. Like the man said:

    “Short words are best and the old words when short are best of all.”

    Words to live by.


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