We are all used to hearing political candidates make campaign trail promises. Usually the promises are benign enough, big on rhetoric and lacking on details. Candidates announce public policy ideas that most anyone can agree with at some level. This is understandable; they want to attract as many voters as possible and don’t want to alienate any voting block. Rarely, if ever, would a politician promise something detrimental, like a tax hike. Just don’t tell Illinois Comptroller and 2010 gubernatorial candidate Dan Hynes that.
Illinois has a projected deficit of over $10 billion for the next fiscal year. Clearly, something needs to be done to reduce this problem of overspending. But instead of fiscally responsible policies that would make the state more efficient, minimize spending, and maximize long term growth, Hynes favors the misguided method of raising taxes for Illinois residents. Two major components of Hynes’ plan involve increasing income and excise taxes.
Currently in Illinois, income tax is held at 3% across all income brackets. The Hynes plan would replace this plan with a progressive income tax. At the highest level income tax would jump up to 7% of income, more than double the current rate. Hynes claims that these adjustments would raise $5.5 billion in revenue for the state. Attempting to balance budgets through raising taxes on the wealthy does not resolve budget deficits. In fact, it does more harm than good, at outlined nicely through this paper from the Heritage Foundation.
Also included in the plan is a “luxury tax” that would add or increase taxes on such goods and services as tanning parlors, dating services, cultural events, and unscheduled charter air flights, among other such items. The projected revenue from that is a claimed $360 million per year. Even with taking the validity of that revenue claim at face value, it is still objectionable due to the scope of the tax expansion. Furthermore, the tax hikes are not limited to “luxury goods”: a $1.00 per pack increase in cigarette taxes is included as well. These are slated to generate $300 million per year over five years, and the revenue will be used to generate funds for a state bonding program.
Raising taxes is never a good solution to solving deficit problems. If anything, the increase in funds encourages further spending. A deficit is symptomatic of mismanagement and excessive spending; you do not solve this problem by adding more money. You do not help an economy in recession by taking more money out of it. Taxing the rich hurts investment, and merely prolongs revenue problems. Tobacco taxes have a history of providing volatile at best returns, and in the long run typically create a net loss in revenue (for a parallel example in Michigan, click here). Finally, and most notable, in his paper outlining his tax proposals, the word “fair” or its variants occur 31 times. Apparently a “fair” plan entails using different rules for different people, forcing some consumers to pay taxes while not others, and taking a disproportional amount from specific groups.
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