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“Stimulus” bill stuck in the House

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Illinois

* A bill which passed the Senate last year 56-0 which could pump a bit of money into the Illinois economy remains stuck in the House, and some Senators want the Speaker to take action now…

Larger tax refunds for struggling families hung in the
balance Wednesday, as Democrats in Illinois’ Senate urged the House to pass an economic stimulus bill that’s been collecting dust for the past year.

The bill, which is stuck in a legislative committee, would double the maximum amount of money low-income families collect through their state Earned Income Tax Credit to $470 from $235 over two years. […]

But the bill has a hefty $95.8 million price tag over two years, which is why it hasn’t made better legislative headway yet, Rep. Verschoore said. “That has been the chief hang up,” said Sean Noble, Voices for Illinois Children liaison, who has followed the legislation since it was proposed. “Just the question of how you pay for it — that’s not uncommon for sure when you talk about anything with a price tag.”

Illinois has one of the lowest caps on earned income tax credits in the country, according to Mr. Noble.

It’s not exactly a huge economic stimulus, but i can see the point about raising the cap. Your thoughts?

posted by Rich Miller
Thursday, Feb 14, 08 @ 10:23 am

Comments

I’m not sure there is a good solution until we do away with the state’s regressive flat tax.

Comment by Squideshi Thursday, Feb 14, 08 @ 10:25 am
Do you see these guys wasting our money, and you want to give them more? Are you out of your mind? They have spent the money we will give them for the next ten years, and they can’t get a clue! They are still writing rubber checks and watching Dan Hynes do the watusi when folks show up with them and try to cash them. We are BILLIONS in debt, and they keep spending!

NO! They are starting to awake from the drunken sailor stage Blagojevich mentioned a few years back and starting to get the shakes when they reach for the trough. NO MORE TAXES.

Comment by VanillaMan Thursday, Feb 14, 08 @ 10:34 am
I think Illinois needs to do an economic stimulus package ASAP.

I fear that Madigan and others will drag their feet on this to get their pork out of it, though.

Comment by GoBearsss Thursday, Feb 14, 08 @ 10:34 am
Here’s the only problem I have with doubling the EITC -

The EITC now is the lowest of any state (tied for it, actually). But that is because we have the lowest income tax.

Right now - the EITC is a credit of about 2% of your income, with the income tax rate at 3% of your income. After deductions, most people get that credit back and owe now taxes.

But if you double it - you will be giving a tax credit of 4%, while only charging people a 3% income tax still.

So, the credit is larger than the tax itself - BEFORE deductions, etc. That just doesn’t seem very logical.

I think people see that we have the lowest EITC rate of any state and want to raise it to the national average. But they don’t realize that it is low because we have a low income tax, and is proportional to our income tax.

Comment by GoBearsss Thursday, Feb 14, 08 @ 10:40 am
Whatever the politicians want to do to save face–fine. But don’t expect any “stimulus” out of an “earned income” credit hike. It creates nothing but income substitution effect. I realize it’s got a heavy dose of feel-good in it, but the economics stink.

Comment by Greg Thursday, Feb 14, 08 @ 10:44 am
Um, economic stimulus?!

I like Sean Noble and Voices, but if the EITC increase passed, folks wouldn’t see any money until 2009.

The best economic stimulus for Illinois would be extending unemployment benefits, or a long overdue increase in TANF payments. Both would put money into the economy immediately, in the pockets of folks most likely to spend it.

That’s not to say that expanding the EITC isn’t a good long-term solution. So is cracking down on payday loansharks and predatory lenders. So is investing more money in schools.

Frankly, I look for the Governor to follow Obama’s lead and re-unveil his capital development plan and call it an economic stimulus package, even though most of the stimulus will go to concrete company owners.

Comment by Yellow Dog Democrat Thursday, Feb 14, 08 @ 10:49 am
“I like Sean Noble and Voices, but if the EITC increase passed, folks wouldn’t see any money until 2009.”

That’s also a good point.

If you could front-load a benefit, though, with an advance like they are doing federally, that might be a way to do it.

I also agree with TANF increases and extending unemployment benefits. Both would not only stop the bleeding for many families, but would jumpstart the economy with an infusion of money.

Comment by GoBearsss Thursday, Feb 14, 08 @ 10:54 am
I love all these ideas about infusing the economy with money. If we could grow real wealth by increasing borrowing and/or money supply, that would be totally hot. But, alas, income transfers don’t stimulate anything except votes. If you want to do the Keynesian thing (and while I’d favor something different, I think this route is second-best) just build stuff. That’s much more keynesian–not to mention effective–than wealth transfers (if we’re still talking about economic stimulus, as opposed to social justice or whatever.)

Comment by Greg Thursday, Feb 14, 08 @ 11:00 am
I am with Squid on this.

Comment by Ghost Thursday, Feb 14, 08 @ 11:06 am
It seems that in Illinois we are working towards the day when the working poor and lower middle class will live in our society completely free. Affordable housing plus federally inspired bailouts if you buy a million dollar house on $25,000 a year. Free health care with no co-pays regardless of health habits. Free college for the kids. Food stamps to pay the grocery bills. Utility subsidies and free CTA tickets. The only thing they’ll have to pay for is extras. Vacations. SUV’s. Expensive gadgets.

Sounds great if the wealthy classes want to pay for it. But wait. It won’t be the wealthy…their
taxes will remain a tiny fraction of their wealth. It’s the middle class, the next group
of peasants up the ladder who will pay, via frog in the pot type tax increases, going on now and sure to increase.

Our Democratic masters may be populist…but they
remain savvy enough to protect their own interests in a populist giveway and to charge the middle class for it.

Comment by Anonymous Thursday, Feb 14, 08 @ 11:35 am
All we’re talking about is a bigger State deficit, which we aren’t supposed to have anyway. CGFA reports that Illinois’s economy is over 97% tied to the national economy, there’s no point in a STATE stimulus package, except to try to buy votes; 97% of it just flushes out into the national economy, anyway. How about just a real revenue bill and get caught up on Medicaid and other payments, and a capital plan that might create a few construction jobs but would mostly build or repair needed facilities?

I know, that would be acting in a responsible and economically sane fashion and there’s apparently no constituency for doing THAT.

Comment by Marty Thursday, Feb 14, 08 @ 11:38 am
I’m always for people getting their money back. But this is a bad way to “stimulate” the economy. By what? Giving people some extra cash to go out to eat and buy a new TV? How does that help us?

I am in agreement that a progressive income tax should be instituted. It doesn’t have to be outrageous, but at the same time a slight increase - er, surcharge - at the top would help alleviate some of the budget hemmoraging (sp?).

Budget deficits aren’t just a concern for state officials and employees. We’re all affected by government deficincies. Would a wealthy business owner rather have his company taxed to death? Or would he prefer for his own income to be taxed at a higher clip?

Comment by Team Sleep Thursday, Feb 14, 08 @ 12:02 pm
Raising the EITC is a good idea in general as an anti-poverty tool, far more thought should be given to replacing many of the welfare programs with a true negative income tax at the national and state level, but as an economic stimulus plan it will have no effect. If the state wants to help Illinois economy they should focus more on controlling spending, keeping down taxes and fees, and improving education and the State’s capital infrastructure.

Comment by RMW Stanford Thursday, Feb 14, 08 @ 12:14 pm
The GA did pass and the Governor did sign 95-0333. While more modest than the bill stuck in rules, it targeted relief toward the most needy EITC recipients without breaking the bank.

Comment by ANON Thursday, Feb 14, 08 @ 12:29 pm
Economic stimulus packages are fluff on the state and federal levels. The dollar amounts are too small a percentage of economic activity to have any real impact. Even worse, they’re funded through borrowed money. It’s a way for legislators to pretend they’re doing something while ignoring meat-and-potato issues regarding taxation, spending, education and infrastructure.

Comment by wordslinger Thursday, Feb 14, 08 @ 2:03 pm
I wouldn’t think giving extra money to only the poor would help stimulate the economy all that well. Wouldn’t they just use it to pay the bills that are skyrocketing? If you give a shot of cream to someone whose glass is half empty, they are likely to just pour it in; if you give it to someone whose glass is full, you have a better chance of it spilling over into the economy.

Either way, now is NOT the time for the State to be discussing increased spending for Pete’s sake.

Comment by Cornerfield Thursday, Feb 14, 08 @ 3:19 pm
===if you give it to someone whose glass is full, you have a better chance of it spilling over into the economy.===

Not really. The poor are more likely to spend money right away because of their cash flow situation. The better off are less likely to spend it.

Comment by Rich Miller Thursday, Feb 14, 08 @ 3:23 pm
Increase spending does not always produce the best results for economic growth in the long run. In the case of the United State we would be better off in the long run if people saved more, increased saving means more money for investment, increase in capital and in the long run higher level of productivity and production and higher consumption which into turn means more new jobs and stronger economic growth.

Comment by RMW Stanford Thursday, Feb 14, 08 @ 3:37 pm
Right, the poor are more likely to spend it, but consumer spending is a little like a short term sugar rush. Consumption and investment choices, which are generally considered to be based on long-term earnings estimates, are unaffected by rebates. They’re just a transfer from more productive to less (pardon the blunt language).

If you build a road, you don’t have to worry about what percent of the funds will be “multiplied.” If we’re not going to improve incentives to favor investment (since we already save negatively), we should at least apply keynes properly.

Comment by Greg Thursday, Feb 14, 08 @ 3:40 pm
Illinois is already in a hole and we’ll just dig it deeper with no measurable benefit. We can get the same amount (or likely more) money into the public’s hands through a capital program where with an ionfusion of spending on construction. That cash will also pass from hand to hand (starting with the governor’s friends, unfortunately, but no 100%) and also have a multiplier effect. What would benefit Illinois more, thousands of people getting cash for nothing and buying televisions, or thousands of people getting cash for building something that improves the state’s infrastructure and then going out and buying televisions. By the way, most of the televisions are made in China or Korea, so we give the cash to Best Buy and they send it out of the country.

Comment by NoGiftsPlease Thursday, Feb 14, 08 @ 9:00 pm