* Greg Hinz writes about a new report from the Illinois Economic Policy Institute on state taxation…
The report’s top line is that if Illinois just adopted tax rates and schedules equivalent to those in neighboring states, its budget deficit would vanish. For instance, it says, adopting key components in the Wisconsin tax code would net Illinois an extra $8.3 billion a year, and following Indiana and Iowa’s lead would get Rauner et al. an extra $4.6 billion and $7.3 billion a year, respectively.
But I found other data more interesting.
For instance, the average Illinois household in 2013 (before the income tax rate dropped back) paid 9.14 percent of its income in state taxes, less than the 9.4 percent figure in Indiana or the 9.39 percent figure in Wisconsin. That’s good. But when you look at local taxes, which we also have to pay, it’s another story, with Illinois’ 7.21 percent well above that of 6.3 percent in Wisconsin and 4.7 percent in Indiana.
The full study is here.
* And there’s this…
In Illinois, the lowest-earning 20 percent paid 13.2 percent of their income in total state and local taxes, but the top 1 percent paid just 4.6 percent. That’s a 9.6 percentage-point difference.
Put a different way, as a share of what’s coming in, poor people paid three times as much as the super-rich, because of Illinois’ high sales tax rate, nongraduated income tax and other factors.
Check out the chart here.
Moody’s Investors Service says the state’s backlog of unpaid bills and other obligations now is rising roughly $450 million a month, hitting $6.6 billion as of Dec. 31.
Projections from Rauner’s budget are that the total will hit $9 billion by the end of the fiscal year on June 30 and keep rising from there, assuming no budget deal is reached, Moody’s says—almost what it was after Quinn took over and pushed through a 66 percent income tax hike that gradually reduced the list of IOUs.
It gets worse. “If the state fails to address its structural imbalance for subsequent years, the payment backlog will swell to $25 billion, or 64 percent of expenditures, by the end of fiscal 2019.” […]
Such red ink “poses little immediate threat to timely payment” of interest and principal on $27 billion in outstanding state general obligation bonds, Moody’s says. But it is “a clear indicator of weak liquidity and governance.” […]
“Growth in the payment backlog is an alternative to politically difficult budget-balancing measures as well as to cash-flow borrowings that can temporarily alleviate liquidity pressures,” Moody’s concludes. And if the IOU total rises faster than now is expected, it “would indicate worsening liquidity that at some point will affect the ability to make monthly debt service fund deposits.”