The tax hike made a huge difference
Wednesday, Jul 25, 2018 - Posted by Rich Miller
* Difference between the last impasse and first post-impasse fiscal years…
* As I think we’ve already discussed, revenues exceeded expectations by about $900 million…
Federal revenues of $4.0 billion exceeded projections by $614 million, or 18.0%. The federal component of General Funds revenues relates mainly to reimbursements for State Medicaid spending. Budget officials said the federal revenue increase was largely a matter of timing: because the State paid more Medicaid bills before the end of the fiscal year, more matching federal payments were received and booked in FY2018 instead of in FY2019. It should be noted that the federal revenues shown in the table above do not include $1.2 billion of Medicaid reimbursements due to bonds sold in November 2017 to reduce the bill backlog.
The State also brought in more income taxes than expected, which has been attributed to federal tax changes. Corporate income taxes (net of amounts diverted to pay tax refunds) of $2.0 billion exceeded projections by $133 million, or 7.1%. Net individual income taxes of $17.7 billion were $115 million, or 0.7%, above GOMB’s forecast.
Transfers were above projections, largely due to $198 million in additional payments from the Capital Projects Fund to reimburse General Funds for capital purpose debt service costs. Sales tax receipts of $7.8 billion were $141 million below forecast amounts.
- anon2 - Wednesday, Jul 25, 18 @ 1:57 pm:
Rauner and other Republicans who insist the income tax should be rolled back to a 3 percent rate ought to be responsible for explaining how they would accomplish that without sinking the credit rating and education funding, and ballooning overdue bills.
- Chicago Cynic - Wednesday, Jul 25, 18 @ 2:06 pm:
That’s so weird. Higher taxes translates to more revenue for the state. Who knew?
- A guy - Wednesday, Jul 25, 18 @ 2:12 pm:
I’ll comment as soon as Willy tells me what to think. Won’t take long.
- BlueDogDem - Wednesday, Jul 25, 18 @ 2:19 pm:
Gotta luv me some Trump. 4 more years
- Huh? - Wednesday, Jul 25, 18 @ 2:20 pm:
I thought the income tax increase was going to kill the state and drive everybody out.
- Oswego Willy - Wednesday, Jul 25, 18 @ 2:21 pm:
===I’ll comment as soon as … tells me what to think. Won’t take long.===
Your insider-outsider polling should help ya comment, not me.
To the Post,
Rauner could say that signing a budget that required and certified that 32% tax increase is his way of getting Illinois healthier, and use the bond ratings leveling off as a win for him.
Rauner won’t, as governors who sign tax increases can face severe backlash.
The Brave 15, the Perfect 10… they deserve credit.
Rauner’s signature is just a by-product of 152 legislators saying “enough is enough”
- Deadbeat Conservative (Blocked Yet?) - Wednesday, Jul 25, 18 @ 2:29 pm:
Those ostensibly opposed to these revenues need to explain what “new programs” are being created with this money.
You have Jim Durkin and his ilk falsely claiming no debt is being paid with these revenues. Their lies are creating the commenter Steve ’s and continue to make fiscal responsibility a negative at the polls.
- Anon - Wednesday, Jul 25, 18 @ 2:33 pm:
With the capping of the state and local deduction that tax hike was realistically the last one we will probably see for a while.
People are going to get pounded next year when they realize how much their federal taxes are going up, and there will be zero appetite for additional tax increases.
Timing couldn’t be worse for our state in that regard.
The lawsuits and work arounds aren’t going anywhere, as they are basically just for show at this point for state governments to make it look like they are doing something even though its out of their hands.
- Texas Red - Wednesday, Jul 25, 18 @ 2:36 pm:
Of course every one of those 5 billion extra income tax dollars sent to Springfield are dollars that were taken out of the local economy; they likely would been saved/invested/spent in Illinois.
- Rich Miller - Wednesday, Jul 25, 18 @ 2:49 pm:
===every one of those 5 billion extra income tax dollars sent to Springfield are dollars that were taken out of the local economy===
Um, no. Quite a few of those dollars were put back into local economies because the state had borrowed a fortune from service and goods providers.
- Grandson of Man - Wednesday, Jul 25, 18 @ 2:54 pm:
This is good news and validates the passing of the revenue bill last year.
Unfortunately for the rest of the country, corporate tax revenue is reported to be near a 75-year low. The federal deficit is expected to exceed $1 trillion next year.
https://www.nytimes.com/2018/07/25/business/trump-corporate-tax-cut-deficit.html
It’s also reported that corporate stock buybacks are at a record high, almost double the record high of earlier this year. Shareholders are benefiting much more than employees, which is expected when super-rich corporate types get their political rewards.
- Occam - Wednesday, Jul 25, 18 @ 2:54 pm:
$9.3 Billion of incremental revenue and S&P reiterates their credit rating of BBB- (one step above Junk).
I noticed the link in this post has no mention of spending. What are the odds that every last nickel of the incremental $9.3 Billion has been spent?
- Last Bull Moose - Wednesday, Jul 25, 18 @ 3:01 pm:
Much of the “spending “ was paying down past due bills and unfunded liabilities. Little went to new programs.
- Anonymous - Wednesday, Jul 25, 18 @ 3:02 pm:
Occam 2:54
It should have all been spent. Rich @ 2:49 points to the fact that providers are now being paid for service. We have a mountain of debt, this additional revenue is meant to be spent on reducing the mountain.
- Robert the Bruce - Wednesday, Jul 25, 18 @ 3:04 pm:
===The State also brought in more income taxes than expected, which has been attributed to federal tax changes.===
I’m not understanding this point. Anyone able to explain what federal tax change resulted in more state income taxes than projected?
- RNUG - Wednesday, Jul 25, 18 @ 3:05 pm:
== What are the odds that every last nickel of the incremental $9.3 Billion has been spent? ==
100%. It was needed just to balance the budget and start paying off the debt that Rauner ran up. And it will continue to be needed for several years to undo the damage Rauner did with no budget for 2 years and a lot of questionable / unauthorized spending.
- JT11505 - Wednesday, Jul 25, 18 @ 3:09 pm:
Gee, tax rates went up, revenues went up - so much for the Laffer Curve…
- City Zen - Wednesday, Jul 25, 18 @ 3:19 pm:
“The tax hike made a huge difference”
My kids said the same thing about their college savings deposits, or lack thereof.
==they likely would been saved/invested/spent in Illinois.==
The state has absolutely zero interest in the first, conditional interest in the second, and all-in on the third.
- Demoralized - Wednesday, Jul 25, 18 @ 3:21 pm:
==What are the odds that every last nickel of the incremental $9.3 Billion has been spent?==
As opposed to what? There were $16B in unpaid bills. The number is currently a little less than $8B.
==Gotta luv me some Trump. 4 more years==
What?
- Demoralized - Wednesday, Jul 25, 18 @ 3:22 pm:
==or lack thereof.==
Heaven forbid we pay the bills we incurred.
- Sue - Wednesday, Jul 25, 18 @ 3:26 pm:
Even the recent tax rate hike fails to deliver a balanced budget without regard to the Rauner deficits incurred. Unless the Dems come to terms with spending rates will have to go up on everyone
- City Zen - Wednesday, Jul 25, 18 @ 3:28 pm:
==Heaven forbid we pay the bills we incurred.==
Does Bright Start count woulda’s as a form of currency?
- Demoralized - Wednesday, Jul 25, 18 @ 3:29 pm:
==rates will have to go up on everyone==
That’s true regardless. You still can’t cut enough spending to fix the current problem. If you want to catch up completely more revenue is still needed.
- Occam - Wednesday, Jul 25, 18 @ 3:57 pm:
==It should have all been spent. Rich @ 2:49 points to the fact that providers are now being paid for service. We have a mountain of debt, this additional revenue is meant to be spent on reducing the mountain.==
And what happens when the mountain finally disappears? Do tax rates go back down? Or does the spending orgy really begin in earnest?
- Demoralized - Wednesday, Jul 25, 18 @ 4:00 pm:
==And what happens when the mountain finally disappears?==
Well it ain’t happening anytime soon with the current revenue levels. We’re treading water now.
- Smitty Irving - Wednesday, Jul 25, 18 @ 4:10 pm:
Occam - When the mountain is gone, those mountain destroyin’ dollars can go to the already mandated increases in the Edgar Pension Ramp. No /s
- non-Believer - Wednesday, Jul 25, 18 @ 4:14 pm:
“And what happens when the mountain finally disappears? Do tax rates go back down? Or does the spending orgy really begin in earnest?”
Good comment. Any predictions out there?
- wordslinger - Wednesday, Jul 25, 18 @ 4:24 pm:
–Gotta luv me some Trump. 4 more years–
Huh — just four? Are there some reasons he won’t finish a second term? You know something about those NRA Russian ladies or something?
- Anonymous - Wednesday, Jul 25, 18 @ 4:27 pm:
FIrst things first. We have to tackle the mountain of debt since we’ve been derelict for so many decades. Does this sound unreasonable? I hope not because I shudder to think that people actually manage their household income the way our legislature managed our state.
- Smitty Irving - Wednesday, Jul 25, 18 @ 4:29 pm:
non-Believer - Ever hear of the Edgar Pension Ramp? No /s.
- BlueDogDem - Wednesday, Jul 25, 18 @ 5:01 pm:
Word. My guest in Granite tomorrow?
- wordslinger - Wednesday, Jul 25, 18 @ 5:21 pm:
– My guest in Granite tomorrow?–
Granite? Did you get a deal on the vault with the stone or something?
- JS Mill - Wednesday, Jul 25, 18 @ 5:22 pm:
=People are going to get pounded next year when they realize how much their federal taxes are going up, =
Really? Pounded? Wow, that’s bad right?
Spare me the hyperbole, pounded isn’t even close to the truth. Those with property taxes above the $10k threshold will be unhappy but they won’t be “pounded”. If you don’t like it maybe don’t vote for Trump or his supporters. They are the ones that want to “pound” you.
=Does Bright Start count woulda’s as a form of currency?=
Did you call and ask? Just curious what the impact of that additional 1.25% in state tax had on your Federal AGI adjusted Illinois taxable income has on you economically?
Sounds like you took a real “pounding” to borrow a word from “Anon”. Really made it so you cannot put anything away? Something else could not have been cut first? When salaries stagnated even though my personal costs went through the roof, especially insurance and medical costs (vastly out pacing CPI, we cut back a lot but not college savings.
- Anonymous - Wednesday, Jul 25, 18 @ 5:30 pm:
So, your Bright Start savings have been dinged but you expect other people, working for you, the public to get dinged even more? They have kids too or didn’t you know that?
- Sue - Wednesday, Jul 25, 18 @ 5:49 pm:
Demoralized- so how do you define the current problem? Do you mean our Democratic leadership wants to spend money on all kinds of social feel good programs with dubious returns? The problem seems to be that no one ever wants to come out and cancel spending programs. And the BIG guy promises to spend even more on give aways
- DeputyRegistrar - Wednesday, Jul 25, 18 @ 6:54 pm:
wordslinger — “Granite” is what people in the metro east call Granite City.
- Anonymous - Wednesday, Jul 25, 18 @ 7:16 pm:
what a spin.. Of course the tax increase plugged gaps and we’re financially in a better situation. But this shouldn’t be a feel good moment -all is not well. Pension debt is still crushing.
- JS Mill - Wednesday, Jul 25, 18 @ 7:23 pm:
=Pension debt is still crushing.=
So your plan is what? Welch? Or finally have the money to pay the bill?
The bill created by everyone due to borrowing from the pension.
- Chicago 20 - Wednesday, Jul 25, 18 @ 8:00 pm:
In FY 2000, Illinois corporate income tax revenue was18 cents for every dollar of personal income tax revenue.
http://www.revenue.state.il.us/publications/AnnualReport/Annual-Report-2000.pdf
Now in FY 2018 Illinois corporate income tax revenue has dropped to 11 cents for every dollar of personal income tax revenue.
Why are Illinois corporations paying 38% less in 2018 while Illinois citizens are paying more?
- City Zen - Wednesday, Jul 25, 18 @ 8:09 pm:
==Just curious what the impact of that additional 1.25% in state tax had on your Federal AGI adjusted Illinois taxable income has on you economically?==
You have a CPA referral?
==Something else could not have been cut first?==
Which local business or charity do you suggest? Perhaps my own retirement fund? Then how will I afford the house to raise my grown children who have student debt because the state took a large chunk of their college fund?
==So, your Bright Start savings have been dinged but you expect other people, working for you, the public to get dinged even more?==
You expect children to pay? Won’t someone think of the children?
==The bill created by everyone due to borrowing from the pension…==
…To help pay for salary increases and health benefits of those very employees.
- Anonymous - Wednesday, Jul 25, 18 @ 8:16 pm:
Income tax increases and the sales tax falls below projections..any correlation?
- wordslinger - Wednesday, Jul 25, 18 @ 9:46 pm:
–wordslinger — “Granite” is what people in the metro east call Granite City.–
Believe me, I got it.
BDD, was weepin’ yesterday about the lack of respect and tolerance for other people’s opinions these days.
Have fun at the Trump rally. See you in church.
https://www.nytimes.com/video/us/politics/100000004533191/unfiltered-voices-from-donald-trumps-crowds.html
- blue dog dem - Wednesday, Jul 25, 18 @ 10:51 pm:
Word. You’re in my thoughts and prayers.
- Andy S. - Thursday, Jul 26, 18 @ 7:34 am:
The individual income tax rate increased by 32%, and individual income tax revenue rose 41%. This is the polar opposite of what the Laffer curve theory predicts, because if it were correct tax revenue should have increased less than 32%, even if you take gdp growth and federal tax changes (which did not occur until halfway through fy18) into account.
- Last Bull Moose - Thursday, Jul 26, 18 @ 9:48 am:
The Laffer curve simply says that there is an optimum tax rate to maximize revenue. It also does not speak to other elements of the tax code such as individual deductions.
Comparing tax revenue to total income is easy and useful for many purposes. For this analysis, I would look at tax revenue versus the amount of taxable income. Taxable income does not correlate perfectly with total income.