Fact Finder

Oct. 18, 2012

Can Illinoisans afford another income tax hike?

Myth: Illinois can afford another income tax hike. Fact: Families are tapped out with no room to pay for more tax hikes. Squeezing more money from Illinois families is not an Much of this spending is tied up in things that the option. Theres no room left in the family budget for average family needs to stay afloat such as mortgage another tax hike. Theyre tapped out. payments, rent, car payments, groceries and health care. These items are necessary. Families cannot easily cut According to Bureau of Labor Statistics data, the average from this piece of the pie. Midwestern household is made up of 2.5 persons and has a before-tax income of $58,417. Roughly $13,000 The little money thats left over at the end of the month goes to pay federal, state, local and other taxes, leaving is spent on things like family movie nights, trips to about $45,000 for household spending each year.1 grandmas house and kids softball team fees.

MISC.
Reading $101 (0%) Entertainment $2,548 (6%) Cash contributions $1,589 (3%) Miscellaneous $773 (2%) Tobacco products & smoking supplies $381 (1%) Alcoholic beverages $380 (1%)

Personal care products & services $518 (1%)

Families tapped out: No room for tax hike

Average Midwest household spending by category, 2010

Education $1,153 (2%)

$45,278
Average annual expenditures
Source: U.S. Bureau of Labor Statistics, Consumer expenditures in 2010

Apparel & services $1,474 (3%)

Health care $3,265 (7%)

Personal insurance & pensions $5,371 (12%)

Food $5,738 (13%)

Transportation $7,222 (16%)

Housing $14,762 (33%)

The family budget shrinks when lawmakers increase taxes. With Taxmageddon on the horizon, the federal government is looking to squeeze $3,452 in higher taxes from Illinoisans, which comes in the form of expiring tax cuts and new taxes under ObamaCare.2

This is, of course, on top of the states record 67 percent income tax hike on Illinoisans in 2011, which In fact, in 31 of the 34 states with progressive income costs families one weeks pay each year.3 tax structures, a family of four with a taxable income of $50,000 is taxed at a higher rate than what Illinois The increased revenue from the 2011 tax hike was will tax families under its flat tax after the rate hike supposed help Illinois get its fiscal house in order and partially sunsets to 3.75 percent from 5 percent in 2015.10 pay down its overdue bills. Instead, additional revenues Specifically, the progressive income tax would increase fueled the states habitual overspending and allowed it the tax bill for this family of four by $625 in 2015. Make no mistake; a progressive income tax would increase to dodge structural reforms. the tax bill for Illinois middle class. Illinois economic and fiscal condition worsened after the tax hike. Unemployment is outpacing the To make things worse, it would also destroy jobs and national average, with nearly 600,000 Illinoisans sap economic activity. looking for work.4 Illinois stack of unpaid bills is now at roughly $8.5 billion.5 And the states unfunded pension Quinn and other advocates for tax increases dont liabilities have skyrocketed to more than $200 billion.6 understand that taxing the little money families have left at the end of the month will not solve Illinois dire The tax hike failed. fiscal problems. Worse, causing further cuts in the family budget will only give people another reason to Potential taxes coming your way leave the state.

Advocates for a progressive tax argue that it would only increase taxes on the super wealthy. This is far from the truth. A closer look at a tax hike plan pushed by a union-funded liberal policy group shows why. Their progressive tax plan would increase taxes on 85 percent of filers in Illinois.9

$3,452 in 2013
Taxmageddon: Expiring tax cuts and ObamaCares new taxes

Illinoisans shouldnt be forced to contribute less to their church, save less for retirement or invest less in education. These cuts can and should be avoided. Instead of forcing families to make difficult cuts, state leaders should allow families to keep more of what they earn. Lawmakers must put taxpayers first by cutting spending and cutting taxes.
Benjamin VanMetre is the Senior Budget and Tax Policy Analyst at the Illinois Policy Institute. The Illinois Policy Institutes Fact Finder series aims to debunk myths about public policy issues that affect Illinois.

$625 in 2015
Progressive tax vs. 2015 sunset rate of 3.75%7

Instead of improving Illinois fiscal footing, Gov. Quinn continues to flaunt his disconnect with economic reality: hes already planning another multi-billion dollar tax hike. Passing a progressive income tax is one of my goals before I stop breathing, Quinn said.8

illinoispolicy.org

Scott Moody, Average Illinois household to work an extra week to pay for Gov. Quinns tax hikes, public pensions, Illinois Policy Institute (2011), http://www.illinoispolicy.org/uploads/files/WorkanExtraWeek5-11.pdf
1

William Beach, The cost of Taxmageddon: Impact by state and congressional district, The Heritage Foundation (2012), http://thf_media.s3.amazonaws.com/2012/pdf/sr-110.pdf
2

Ted Dabrowski, The verdict is in: The tax hike failed, Illinois Policy Institute (2012), http://illinoispolicy.org/ uploads/files/3ReasonstoRepealtheTaxHike.pdf
3 4

Ted Dabrowski, The blame game: Illinois unemployment rate jumps to 9.1 percent, Illinois Policy Institute (2012), http://illinoispolicy.org/blog/blog.asp?ArticleSource=5090

Benjamin VanMetre, Facts are stubborn things, Illinois Policy Institute (2012), http://illinoispolicy.org/blog/ blog.asp?ArticleSource=5018
5

Jonathan Ingram and Ted Dabrowski, Pension debt more than doubles under new rules, Illinois Policy Institute (2012), http://illinoispolicy.org/news/article.asp?ArticleSource=4986
6

Ted Dabrowski and Lawrence McQuillan, Progressive income tax: Money grab disguised as tax reform, Illinois Policy Institute (2012), http://illinoispolicy.org/news/article.asp?ArticleSource=5149
7

Huff Post Politic, HuffPost interview with Illinois Governor Pat Quinn, Huffington Post (2012), http://www. huffingtonpost.com/2012/07/12/huffpost-live-interview-w_n_1669568.html
8

Ted Dabrowski and Lawrence McQuillan, Progressive income tax: Money grab disguised as tax reform, Illinois Policy Institute, (2012), http://illinoispolicy.org/news/article.asp?ArticleSource=5149
9 10

Ibid.