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 That’s the takeaway from Illinois’ 2018 Comprehensive Annual
Financial Report, or CAFR. It’s one of the state’s most important financial
documents. And in true Illinois fashion, it was published 245 days late –
tardier than any other state.
Gov. J.B. Pritzker’s solution to the state’s woes? Another income tax hike.
Voters will decide whether to approve a progressive income tax amendment at the
ballot box in November 2020. Assuming the introductory progressive income tax
rates passed by the General Assembly never change, it would send an additional
$3.4 billion to Springfield.
And if history is any guide, it won’t fix anything.
Key to the CAFR is a measure of fiscal health called a “net position.” A state
government’s net position is similar to a company’s net worth. The CAFR revealed
that since Illinois first started trying to solve its problems with income tax
hikes in 2011, its net position deficit has more than quadrupled to $189.1
billion from $43.6 billion.
Most shocking is what Illinoisans saw in the single year after the
record-breaking 2017 income tax hike, which took an additional $732 from the
typical Illinois household.
According to Illinois’ previous CAFR, the fiscal year 2017 net position deficit
was $141.7 billion. So over one year, Illinoisans saw their state’s net worth
drop by 35%, or $47.4 billion, despite shouldering the largest permanent income
tax hike in state history.
There’s only one state in the nation with a worse net position than Illinois:
New Jersey. In the Garden State, Senate President Steve Sweeney has been
shouting from the rooftops about the need for pension reform and government
worker health care reform.
“I’m not supporting a budget that includes new taxes without a solution,”
Sweeney told Politico in March.
“It has never been a solution when you only raise taxes. It only delays the
inevitable.”
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Sweeney is a Democrat and moonlights as an
ironworker union official – hardly an anti-tax zealot.
Chicago Mayor Lori Lightfoot seems to recognize the need for reform
as well.
The new mayor is already in a world of trouble. She’s staring down a
large city budget gap she can’t close without action from House
Speaker Mike Madigan. She’s in heated negotiations with some of the
nation’s most extreme labor unions (the Chicago Teachers Union has
already set a date for a strike vote.) And her city continues to
lose taxpayers to other states.
In the face of this, Lightfoot spoke the truth about the progressive
income tax. Voters across Illinois, Democrats and Republicans,
should take note.
“We can’t keep taxing the hell out of all of our people who make
substantial incomes,” Lightfoot told the Chicago Sun-Times editorial
board.
“That’s not right, it’s not fair and it’s not going to work.”
The CAFR backs her up.
Gov. J.B. Pritzker’s administration interpreted this comment as a
threat. The governor has already spent millions of dollars on TV ads
touting the progressive income tax. A Lightfoot spokesperson later
walked back the mayor’s statement, saying she still supports the
constitutional amendment.
Opponents have already branded the progressive income tax
constitutional amendment as the “blank check” amendment in the
run-up to the 2020 vote. The reason is clear: when the first round
of progressive income tax hikes fail to fix the state’s finances,
lawmakers have shown they’ll simply hit up the middle class for
more.
Voters will decide whether it’s a solution or snake oil.
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