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National Columnists

McCaleb: U-Haul investors drool as tax hike plans pour in

Illinois isn’t going to tax its way out of its fiscal crisis.

Higher taxes in a state that already imposes the largest tax burden on its populace will mean fewer jobs and fewer taxpayers, leading to the need for even more taxes because a fewer number of people will be paying them.

It’s a vicious cycle that policy leaders must address before it’s too late.

What Illinois needs is a curb on state and local government spending, and the kinds of reforms – pension, workers’ compensation, prevailing wage, taxes – that will lower costs and the overall burden on taxpayers, as well as jump-start our stagnant state economy.

That fact, unfortunately, hasn’t stopped a slew of new calls for higher taxes to pay for Illinois’ oversized state government.

It seems like just about every week some new plan pops up that would force more Illinoisans out of their homes and send shares of U-Haul to new highs because of all the people fleeing the state.

The most infamous, perhaps, comes from the Federal Reserve Bank of Chicago, which recently pitched a
1 percent statewide property tax hike on top of the already high local property tax levies that far too many homeowners can’t afford.

Under the Fed’s plan, the owner of a $100,000 home would be on the hook for an additional $1,000 a year – $2,000 for a $200,000 home, etc. – for the next 30 years to pay off the state’s $130 billion in unfunded pension debt.

Their reasoning? A property tax hike would be the “most equitable” way to raise money because homeowners benefit the most from state spending.

Never mind that Illinoisans already pay the second highest property taxes in the country and the highest combined local and state taxes. Or that both of those facts are leading more and more Illinoisans to pack up and leave for greener pastures.

With state lawmakers on both sides of the aisle recognizing the need for property tax relief for their constituents, the Federal Reserve’s plan is a nonstarter, particularly in an election year.

But it’s far from the only one.

The Illinois Economic Policy Institute has proposed more than doubling the state’s motor fuel tax – from
34 cents to 85 cents – and increasing the vehicle registration fee from $101 to $578 a year. And that’s not even to pay down the state’s monumental debt, which Truth in Accounting this week placed at $216 billion, more than $50,000 a taxpayer in Illinois. The IEPI money grab would be for capital transportation projects.

With gas prices already approaching or surpassing $3 a gallon again, that’s not exactly what motorists need.

The nonprofit Civic Federation’s Institute for Illinois’ Fiscal Sustainability also suggests tax increases. While also calling for smart spending caps and other necessary reforms, the Civic Federation recommends Illinois start taxing retirement income to the tune of $2.5 billion annually and expand the state’s sales taxes to 14 services that currently are exempt.

I can hear retirees looking up U-Haul’s phone number as we speak. 

And then there are the calls for a constitutional amendment to allow for a graduated income tax in Illinois, even though the General Assembly just raised income taxes last summer by $5 billion annually.

Championed by Democratic gubernatorial nominee J.B. Pritzker, a graduated income tax establishes higher rates for escalating levels of income.

The biggest problem with Pritzker’s plan is that he doesn’t have one. Or, he’s not revealing it anyway. And that should scare every worker from a minimum-wage earner to a multimillionaire.

Illinois’ constitution guarantees a flat income tax. If Pritzker gets his way, lawmakers can set the tax rates and income brackets anywhere they want and then continue to change them whenever they think they need more of our money.

Proponents of a graduated income tax like to call it a “millionaires’ tax” to trick voters into thinking that only millionaires will be affected. Don’t believe that for a second.

The one plan out there with specific rates and income brackets would implement a tax increase on most workers. State Rep. Robert Martwick, D-Chicago, introduced a progressive tax plan last year that would increase taxes on Illinoisans earning as little as $17,300 a year.

That’s hardly a millionaire’s tax.

Yes, the state has a massive amount of debt. But constantly increasing taxes will only make things worse.

• Dan McCaleb is news director of Illinois News Network and the digital hub ILNews.org. He welcomes your comments. Contact Dan at dmccaleb@ilnews.org.

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