Tax hike no cure for what's ailing Illinois, tax expert maintains
Illinois legislators decided to apply a bandage in the form of a tax hike to the deadly wound Illinois has sustained in the form of debt, Michael Lucci contends.
Lucci, the vice president of policy for the Illinois Policy Institute, also argued on the group's website that the recently passed budget will do nothing to prevent the state from being the first in history to be saddled with a "junk" credit rating.
"House Speaker Mike Madigan and Senate President John Cullerton have shepherded a tax hike plan that raises taxes but does nothing to rein in the cost drivers – such as pensions and unaffordable government worker compensation and benefits – that have saddled Illinois with so much debt," Lucci wrote. "And the new tax hike will further hamper economic growth by driving still more people – and taxable income – out of the state, and reducing economic activity."
Lucci said the budget does not even begin to address some of the state's most serious long-term problems, such as paying for retiree health care and funding Chicago Public Schools.
"It’s worth noting the budget plan also fails to address nearly $60 billion in long-term debt for retiree health care and tens of billions in bonded state government debt; the state is not even covering the annual interest cost on these debts," Lucci wrote. "And the budget plan and tax hike don’t solve the problem of the tens of billions more in unsustainable debt carried by major local governments in Illinois, such as Chicago and Chicago Public Schools."
Moody's Investors Service wrote on July 5 that although Illinois has finally approved a budget after two fiscal years without one and raised taxes to boost the economy, the plan contains serious holes, such as not dealing with its mountain of debt, which is currently approximately $32 billion.
"In addition, the state's baseline tax collections declined in fiscal 2017, suggesting that any tax increase may yield less revenue than anticipated in coming months," Moody's report said.
Moody's has said it is reviewing Illinois' status to determine whether to again lower its credit rating.