STUMP » Articles » Taxing Tuesday: Illinois Taxpayers Beware » 4 June 2019, 03:41

Where Stu & MP spout off about everything.

Taxing Tuesday: Illinois Taxpayers Beware  

by

4 June 2019, 03:41

Big win for tax hikes, big trouble for the middle class

(In Illinois)

On Monday [May 27], the Illinois House of Representatives voted to amend the Illinois Constitution by adding progressive income tax language. The amendment passed 73-44-1 on party lines. It will now end up on the ballot next year for all Illinoisans to vote on.

Politico Illinois described the House vote as “Pritzker’s big win.” The better way to describe it is “big trouble” for Illinois’ middle class. But you wouldn’t know that from what tax hike proponents say.
…..
1. Amendment now, rates later. The vote for/against a constitutional amendment will only determine whether a progressive tax structure is allowed or not. The actual progressive tax rates will come later. Support for the amendment means entrusting politicians with what amounts to a blank check. Illinois politicians don’t deserve that trust.
…..
2. Taxing only the rich won’t work. There’s little incentive for wealthy residents to stay if they get stuck with a 60 percent increase in their income tax rates. The 20,000 Illinoisans who make $1 million-plus currently provide more than 16 percent of the state’s revenues. Only a few of the wealthiest have to leave to wreck Pritzker’s plans.

3. Pritzker’s “Fair Tax” isn’t a real plan. The governor’s low introductory rates raise just $3.4 billion in new revenue, only a fraction of the $10 billion-plus in new spending promises he’s made. It’s much like a cable company offering an “introductory” deal just to rope you in. And remember, Pritzker’s plan does nothing to fix Illinois’ structural problems, which means the state’s fiscal holes will only get bigger.

And there’s one more point, but it’s pretty clear — when you’re trying to target only 0.3% of the population, it really doesn’t take much to suffer a state revenue hit.

Connecticut could tell you about that.

And maybe the CT folks could teach Illinois about setting up a department that keeps track of the handful of billionaires you’ve got. And who your state will be beholden to.

Ah, like Pritzker!

The Data Would Tell Them They Are Wrong

One of the things I hear from a lot of folks is that they are “data dogs”. Usually, it means they manipulate data to prove their point. What they don’t want to tell you is they are fanatics. The Democrats in Illinois are like that.

On Memorial Day when everyone had a day off and were supposed to be remembering the fallen, Illinois Democratic lawmakers passed the largest tax increase in the history of the state. It goes on the ballot in 2020. But, my guess is a lot of people won’t be hanging around to vote on it.

Remember, on a state level they are increasing:

1. gas taxes
2. water taxes
3. internet streaming taxes
4. grocery bag taxes
5. beer, wine and liquor taxes
6. car registration and licensing taxes
7. cab taxes for using services like Uber/Lyft
8. hotel taxes
9. cigarette taxes
10. sales taxes

Here is some data for the “data dogs”;

Illinois lost more people than any other state in the last census. From 2011-2017, Illinois was second in the nation for people leaving. If you don’t understand that, Illinois was 49th out of 50 for in migration. The state will lose one or two representatives in Congress. Chicago is the largest major metropolitan city with the most outflows. New York and LA experienced outflows too, but Chicago beats them on a percentage basis. Houston someday soon will become the third most populous city in the US.

Ooof, after already losing position to Los Angeles? Poor Chicago.

Other states have tried to institute progressive taxes. Their tax the rich policies have only gotten the rich to move out. NY, Connecticut, New Jersey all saw wealthy people leave in large numbers when they put in highly progressive tax hikes. Guess what? Those are the job creators. They are leaving to create jobs somewhere else or they are going John Galt. Funny thing is Democrats prefer John Galt because Galt was disengaged from the process.

People aren’t moving away for better weather.

Among my friend group, I don’t know too many people that are staying. Since 99% of every tax hike goes to pay public worker pensions they know full well that this progressive tax hike along with all the others won’t scratch the surface on the fiscal problems Illinois is facing. In a flight or fight decision, it’s much more easy to move away and they are. I guarantee, Chicago’s cultural institutions are not prepared for it. They are a large reason people stay, or come here.

And they’re nothing like the cultural institutions of New York City, for example.

Here is an alternative view by Eric Zorn: Alas, no, Illinois is not a high-tax, free-spending state

Illinois ranks just 21st among the 50 states in combined per capita state and local government spending.

We’re 18th in the per capita amount of tax money the state collects, 24th in state tax revenue as a percentage of personal income.

I lob out these facts — gleaned from “2018 Illinois National Rankings,” a state-by-state comparison of a variety of fiscal matters issued at the end of last year by the General Assembly’s Commission on Government Forecasting and Accountability — in response to a call from the conservative Illinois Policy Institute think tank for “ ‘fair-tax’ truth bombs.”

So, just asking questions here….

Ahem, I’m just asking questions here.

1. Are these rankings for taxes including total state and local taxes? I ask this, because there’s the local taxes paid by various Illinoisians, SPECIFICALLY PROPERTY TAX, that may bump up Illinois a little higher in the ranking.

I assume no, due to Zorn’s insistence on “state tax revenue” and “money the state collects”.

2. With respect to the state and local spending, is that just following cash accounting or accrual accounting?

Now, that may sound esoteric, but in real accrual accounting, the state/locality accrues costs on pensions earned that period as well as interest accrued on the unfunded pension liabilities (not to be confused with the amortization of said unfunded liabilities… because we see negative amortization, meaning that interest accrued is higher than the amortized payments… and that’s even before we check whether they cover that amortized amount. (Often, they don’t).)

Then there’s the unpaid vendor bills. Under accrual accounting, you get hit with the cost when you incur it… and then you have whatever interest accrued to the extent one doesn’t pay those bills on time.

This is an important item, because Illinois has been underpaying for its vendor bills and its pensions for a very long time.

Even Zorn recognizes that:

Nothing wrong with the truth. Like the truth that Illinois is in a world of fiscal hurt — a $6.7 billion backlog of unpaid bills, a worst-in-the-nation unfunded public pension liability of roughly $134 billion and worst-in-the-nation credit ratings.

That sort of indicates to me that Illinois may be incurring expenses well above other states — thus the ever-increasing debt.

But if we measure spending only by the cash leaving the door right now… that’s very misleading.

Some more Illinois tax stories:

Good luck, Illinoisians.

I know I need my own luck.

I GET A REPRIEVE

(for now)

Connecticut Democrats Finalize Budget Agreement

Connecticut’s Democratic legislative leaders reached a handshake agreement with Gov. Ned Lamont on a two-year budget that doesn’t raise income-tax rates and closes a $3.7 billion deficit.
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Lawmakers didn’t disclose many details of the roughly $40 billion two-year budget but said it doesn’t raise businesses’ tax rates or sales-tax rates. The sales tax, however, will expand to include more categories of goods and services.

The budget doesn’t include the additional 2% surcharge on capital gains, which the governor opposed but some Democrats supported. The governor’s most controversial proposal, instituting highway tolls in the state, also wasn’t included in the deal.

“It would be very difficult to pull off a vote on tolls before we adjourn” in June, said Democratic Speaker of the House Joe Aresimowicz at an unrelated news conference Thursday. “It’s highly unlikely.”

Mr. Lamont’s proposal to shift some teacher pension costs from the state to cities and towns was also left out of the budget, lawmakers said. That proposal was widely opposed by mayors and first selectman throughout the state.

Mr. Lamont’s Democratic predecessor, Dannel Malloy, also tried to get cities and towns to start chipping in to the teacher retirement system and failed.

The deal does include an agreement to make smaller contributions to the teacher pension program but extends the period of time in which the state will be required to make those payments.

The “for now” is the key item.

I will have to revisit the issue of the Connecticut teachers pensions, which are sticky.

CT Mirror: Budget deal struck, doesn’t contain tax hike on wealthy

Gov. Ned Lamont and Democratic legislative leaders announced a tentative, two-year $43 billion budget deal Thursday that does not contain the income tax hike on the wealthy sought by progressives in the General Assembly.

….
Neither the Democratic governor nor legislative leaders disclosed all the details of the agreement, most of which had been hammered out late last week.

But Lamont noted it avoids any increase in income tax rates, settles a longstanding dispute with hospitals, expands local education funding as well as Medicaid coverage for working poor adults, and boosts the emergency budget reserve to about $2 billion.

…..
But the deal also shifts billions of dollars in contributions owed to the teachers’ pension between now and 2032 onto the next generation of taxpayers, who will make that up — plus interest — between 2033 and 2049.

Yeah, well. I hope I won’t be working in CT then.

Frankly, though, I think there is going to be a much earlier reckoning than 2033.

High-tax Connecticut plagued by pension problems…but… that’s for another time.

ACCOUNTING TRICKS DO NOT SOLVE FISCAL PROBLEMS

But here’s the big problem: it’s a trick.

Policy Corner: A Billion Dollars for a Single-Month Accounting Gimmick? Seems Legit.

The current budget includes a provision, which would go into effect almost immediately, that would require credit-card companies to remit the sales-tax portion of the transaction directly to the state. If it could be done, it would involve an enormous up-front cost and huge annual costs in order to provide a negligible benefit to the state. Sound familiar?

With only seven legislative days left in the 2019 session, as the legislature scrambles to consider, and maybe to pass, a wide variety of mostly bad and often unconstitutional proposals, one astonishing provision in the budget bill bears special consideration.

Not because it’s the worst idea of the session, or the most expensive. But because it is exquisitely emblematic of how the legislature has proceeded in 2019, and how government seems to be conducted now in Connecticut.

In a word: badly.

In a few more words: expensively and to little ultimate purpose.

Section 19 of the current budget draft would require credit-card and related companies to figure out, at the time of purchase, how much of a transaction is payment and how much is tax and to remit the tax portion directly to the state.

This would speed up transactions, and it would help to thwart delinquent sales-tax payers (in that sliver of cases in which the party avoiding paying the sales tax is a Connecticut business that accepts credit cards but still doesn’t pay its sales taxes).

This may sound reasonable – until you learn anything about the proposal.

First problem: it would cost as much as a billion dollars to get running. That’s a lot of money for a single industry. In theory the merchants would bear this fee, but in reality, much of it would fall back on the credit companies and other middlemen, who provide the equipment and create the software and processes.

Connecticut is not a big state. We could easily see some companies just stop doing business with Connecticut firms. You know how irritated you get when someone starts to write a check in front of you at the grocery store? Welcome back to the 1980s, Connecticut!
…..
Third problem: it can’t be done, technically. That’s right. Right now, no one has or can provide this service.

It’s not as easy as it sounds: there are lots of different sales taxes that are randomly assigned to some goods and services, but not to others. They’re not all the same rate. They change every year. Bills would have to be split instantaneously with proceeds sent to different locations millions of times a day.

It’s not the credit card companies’ business to keep track of the individual items. It’s the merchant.

But here’s the bottom-line:

Fourth problem: All of these massive expenses, all these demands to do the impossible, are for pretty much to no benefit. The “real time” sales-tax collection would speed up remittances to the state by about one month, one time. In other words, this whole proposition arises in order to perform a one-time accounting trick on the state books.

I highly doubt this would boost the sales tax collections in any lasting sense… all those sales-tax-dodging entities probably are cash only, as it is.

So, even without all the infeasibility and cost to do something in a more complicated way than is currently done, this is to book revenue earlier for the state.

Anybody who has taken an accounting class understands how booking sales early via various means (and then the refunds the next month) is a trick that might work once, but it’s not something that will fix anything in an ongoing way.

It it pure bullshit for no good reason. Go away, little politicians.

I can see why they keep mentioning the Democrats did not talk about the details in the budget. They sure as hell won’t want to talk about this one. It’s idiotic.

TAX STORIES

Poor dope, living in California.

TAX TWEETS








Hmmm, there’s a point…


[so much stupid in the above]




Okay, that is pretty funny to me, given how stupid that is.


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