January 26, 2012

The Tax Foundation’s 2012 State Business Tax Climate Index was recently released, revealing Illinois saw the biggest downward shift of any state. The nationally recognized and widely respected non-partisan organization reports that Illinois fell a whopping twelve places in the rankings, from 16th place in 2011 to 28th place in 2012. 

Though the state’s 67 percent income tax hike undoubtedly contributed to the drop, Illinois is a high-tax state in other areas. According to the Tax Foundation, the state ranks as the fifth worst in business taxes, the seventh worst in unemployment insurance taxes and the sixth worst in property taxes. Though some of Illinois’ neighboring states were ranked more poorly in these areas, when comparing rates in all tax categories to those of our neighbors, Illinois takes the cake.

The Tax Foundation highlighted the important role taxes play when it comes to a state’s ability to attract and retain employers. Echoing the concerns of Republican lawmakers, the report noted that, “States do not institute tax policy in a vacuum. Every change to a state’s tax system makes its business tax climate more or less competitive compared to other states, and makes the state more or less attractive to business.” The Tax Foundation emphasized that when higher taxes cut into profits the cost is passed on to consumers—through higher prices, employees—in lower wages and fewer jobs, or shareholders—in lower dividends or share value.

The Tax Foundation report reinforced this, noting, “evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth. “ The Tax Foundation pointed to former Gov. Rod Blagojevich’s maligned gross receipts tax (GRT) proposal, emphasizing that hundreds of millions of dollars in capital investments in Illinois were halted until the GRT bill was overwhelmingly defeated.

Additionally, the Tax Foundation noted that while a state’s tax burden is not businesses' only consideration when it comes to establishing a presence, it is undoubtedly a compelling one. The report pointed to the recent business tax credits that were approved by Illinois lawmakers in late 2011. The costly credits were negotiated after desirable Illinois companies, including Sears and the Chicago Mercantile Exchange, threatened to leave the state citing the burdensome cost of the state’s new corporate tax increase.

Senate Republicans have been actively advocating for state budget reforms and spending cuts as a way to meet Illinois’ fiscal obligations and roll back the Democrat’s 67 percent tax increase as scheduled. The Tax Foundation notes that “unlike changes to a state’s health care, transportation, or education system…changes to the tax code can quickly improve a state’s business climate.”

After years of pushing legislation to end the controversial and scandal-prone "Legislative Scholarship Program," Senate Republicans have decided to unanimously walk away from the program voluntarily.

The action drew quick editorial applause from the state's largest newspaper, the Chicago Tribune, which wrote: "Republicans in the Illinois Senate are voluntarily suspending their participation in the tuition waiver program that has brought so much dishonor — and so much dishonorable conduct — to the General Assembly. We applaud Minority Leader Christine Radogno for securing commitments that all 24 members of her caucus won't award waivers for the 2012-13 school year"

The Newspaper then chided the Democrat leaders of the legislature for their refusal to end the program, pointing out the the Senate Republican action "raises an obvious question for Democratic legislators...What, exactly, is your problem? Do you think citizens by the millions haven't learned what a rip-off you're perpetuating?"

Senator Radogno and other Senate Republicans have consistently sponsored legislation to end the program. As recently as last fall, a measure that would have ended the program was blocked by the Democrat leadership. 

The program allows legislators to grant free tuition waivers to students at public universities in Illinois. There are no academic standards or requirements that the scholarships be based on need. One problem with the program is that the scholarships are not paid for by the legislature, but simply require the universities to waive the tuition costs. Since the universities receive no financial support for the program, costs are passed on to other students.

In the past the program has been plagued by revelations that some legislators have awarded the waivers to relatives, political allies and campaign contributors. While many legislators took steps individually to avoid conflicts – many handed over the awarding of scholarships to independent committees – not all did so and individual abuses continue to surface.

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January 12, 2012

A year ago, Democrat lawmakers pushed through a 67 percent tax hike that takes a week's pay out of the pockets of Illinoisans every year.  They said the tax hike would pull Illinois back from financial collapse. And yet, a year later is Illinois better off with the tax increase?  What do taxpayers have to show for this massive tax increase—other than less money in their pockets?

Democrat leaders pushed the tax hike as a way to pay off old bills and resolve the state’s financial problems, insisting they would eventually roll back the increase. Despite these assurances, they have continued to spend as though the increase will be permanent.

As a result, just last week, Gov. Quinn released budget projections showing that instead of generating a surplus, the Fiscal Year 2012 budget still spends more than state takes in.  In fact, according to the Governor, Illinois will still see a $500 million shortfall at the end of this fiscal year—not including $2 billion in deferred obligations.

Looking forward, Quinn’s projections indicate that in the year the tax hike is supposed to expire, the state is on target to spend $800 million more than available revenues. Senate Republicans point out that by continuing to overspend, the state’s Democrat leaders are building expenses into the state budget that will make it more difficult to phase out the tax hike.