2011 hit with a thud. A hard, dull thud. On my yearly salary, that is. And my wife’s yearly salary. And probably yours too. That was the time when IL raised the income tax rate 67% from 3% to 5%. We all knew how painful it would be back then, but deep down we thought, “Well, if this is going to actually help get us out of that deep hole our politicians dug for us, maybe it’s not that bad. And it’s only for a few years. After all, it’s a temporary tax hike, right? Right?!”
Now is the time where I’d inform the reader to fast-forward to today, but since we’re already here, I’ll spare you the logistical niceties. And unless you’ve carved some drawings into those dirt walls around you, you’ve probably noticed the view hasn’t changed all that much. Yes, we’re still in that hole. But at least it was a cool summer, right?
At the time when the income tax hike first took effect, IL had some unpaid bills to take care of. About $9 billion worth, give or take a few hundred million. Luckily, we had that windfall of 30-some-odd billion dollars of additional revenue coming in from that income tax hike for the past 4 years. Whew! Problem solved…and even some cash left over for an honorary banquet for all the taxpayers of Illinois where everyone gets a cup of cream of rice soup and one scoop of vanilla ice cream in a tin cup. I mean, according to the calculator Microsoft provided with my computer, thirty billion minus nine billion equals no unpaid bills, at least as far as I’m concerned.
Well, depending on what accounting trickery you subscribe to, the amount of unpaid bills today is around $4 billion. To no one’s surprise, nearly four years later, even with billions in “found money”, the state still hasn’t figured out how to pay its bills. If Illinois was a deadbeat gambler in the movie Goodfellas, it never would have made it past Henry Hill’s childhood flashback.
What sane, responsible person budgets this way? A prudent person would have paid the old bills, balanced the budget on a rate slightly lower than the new higher rate (since it was going to expire soon anyway), then make gradual cuts to the budget to ease everyone into the new fiscal world. Lather, rinse,repeat. But that’s not how things work in the Land of Lincoln.
Now, many our politicians want to make the temporary tax hike – that same tax hike that was supposed to pay those unpaid bills – permanent. Others want to institute a progressive state income tax on your income (well, unless you’re retired, then it still remains the very progressive big fat 0%). And on top of that, certain Chicago aldermen are recommending a municipal income tax on all the folks who live in the suburbs yet have the audacity to work in the city. Imagine if the Illinois government were a business (indulge me here). It offers the same products and services every year at drastically increased prices to fewer customers. The only new product its R&D department can develop is a new tax. And it’s all conveniently located under one, monopolistic roof. While supplies last!
For a while, I sat back and watched the carnage unfold. Then, in an attempt to educate myself on one of the biggest problems facing Illinois, the dreaded pension crisis, I came across this helpful nugget on the TRS website:
“Currently, teachers pay 9.4 percent of their salary and school districts pay 0.58 percent of its teachers’ salaries to TRS. The federal Social Security tax is 12.4 percent, split evenly between the employee and the employer. For school districts, placing teachers in Social Security would result in a 968 percent increase in taxes and contributions devoted to retirement.”
Forget the questionable math for the moment. “NINE-HUNDRED-AND-SIXTY-EIGHT PERCENT”. Who talks that way?! Wouldn’t you say “10 times” or “nearly 10 times more”? Heck, why not just round up to 1000% and cross your arms in a feigned gesture of accomplishment? And the fact I used a condescending voice in my head when I read that statement probably didn’t help the union’s case here either. This is what we’re dealing with in Illinois? They are all but begging to be challenged…
So where do we go from here? Let’s see the numbers for what they truly are. Let’s personalize the data so that the average taxpayer can easily understand the situation and relate it back to their own lives. Let’s see what vested interests want to keep the status quo and why. Let’s call out the absurdities in our state’s government in general. Let’s take a deeper dive into some concepts already being discussed and others not yet explored, such as…
- The true cost of the income tax hike to you, the individual taxpayer
- What our politicians are really trying to accomplish with a “millionaire’s tax”
- How a pension stacks up $ for $ against your retirement
- What the true employee portion of the pension contribution should be
- The under-funding of pensions vs. the under-taxing of retirees
- Why taxpayers assume all the risk in the pension system and don’t charge for it
- Changing union contracts vs. changing the Illinois Constitution
And let’s try to make this fun and interesting, because our politicians are intent on keeping this boring and confusing. And they know boring and confusing leads to complacency. And complacency leads to Illinois.