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Can Illinoisans Afford Another Income Tax Hike

Can Illinoisans Afford Another Income Tax Hike

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Published by: Illinois Policy Institute on Oct 18, 2012
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Fact Finder
Illinois can afford another income tax hike.
Families are tapped out with no room to pay for more tax hikes.
Can Illinoisans afford another income tax hike?
Squeezing more money rom Illinois amilies is not anoption. Tere’s no room le in the amily budget oranother tax hike. Tey’re tapped out.According to Bureau o Labor Statistics data, the averageMidwestern household is made up o 2.5 persons andhas a beore-tax income o $58,417. Roughly $13,000goes to pay ederal, state, local and other taxes, leavingabout $45,000 or household spending each year.
Much o this spending is tied up in things that theaverage amily needs to stay aoat – such as mortgagepayments, rent, car payments, groceries and health care.Tese items are necessary. Families cannot easily cutrom this piece o the pie.Te little money that’s le over at the end o the monthis spent on things like amily movie nights, trips tograndma’s house and kids’ soball team ees.
Transportation$7,222 (16%)Apparel & services$1,474 (3%)Health care$3,265 (7%)Entertainment$2,548 (6%)Reading$101 (0%)Education$1,153 (2%)
Cash contributions$1,589 (3%)Tobacco products& smoking supplies$381 (1%)Personal insurance& pensions$5,371 (12%)Food$5,738 (13%)Alcoholic beverages$380 (1%)Housing$14,762 (33%)Miscellaneous$773 (2%)
Average annual expenditures
Average Midwest household spending by category, 2010
Personal careproducts & services$518 (1%)
Families tapped out: No room for tax hike
Source: U.S. Bureau of Labor Statistics, Consumer expenditures in 2010 
Oct. 18, 2012
 Te amily budget shrinks when lawmakers increasetaxes. With “axmageddon” on the horizon, the ederalgovernment is looking to squeeze $3,452 in higher taxesrom Illinoisans, which comes in the orm o expiringtax cuts and new taxes under ObamaCare.
Tis is, o course, on top o the state’s record 67percent income tax hike on Illinoisans in 2011, whichcosts amilies one week’s pay each year.
Te increased revenue rom the 2011 tax hike wassupposed help Illinois get its scal house in order andpay down its overdue bills. Instead, additional revenuesueled the state’s habitual overspending and allowed itto dodge structural reorms.Illinois’ economic and scal condition worsenedaer the tax hike. Unemployment is outpacing thenational average, with nearly 600,000 Illinoisanslooking or work.
Illinois’ stack o unpaid bills is now atroughly $8.5 billion.
And the state’s ununded pensionliabilities have skyrocketed to more than $200 billion.
 Te tax hike ailed.
$3,452 in 2013
Taxmageddon: Expiring tax cuts
and ObamaCare’s new taxes
$625 in 2015
Progressive tax vs. 2015 sunset rate of 3.75%
Instead o improving Illinois’ scal ooting, Gov. Quinncontinues to aunt his disconnect with economicreality: he’s already planning another multi-billion dol-lar tax hike. Passing a progressive income tax is “one o my goals beore I stop breathing,” Quinn said.
 Advocates or a progressive tax argue that it would only increase taxes on the super wealthy. Tis is ar romthe truth. A closer look at a tax hike plan pushed by a union-unded liberal policy group shows why. Teirprogressive tax plan would increase taxes on 85 percento lers in Illinois.
 In act, in 31 o the 34 states with progressive incometax structures, a amily o our with a taxable incomeo $50,000 is taxed at a higher rate than what Illinoiswill tax amilies under its at tax aer the rate hikepartially sunsets to 3.75 percent rom 5 percent in 2015.
Specically, the progressive income tax would increasethe tax bill or this amily o our by $625 in 2015. Makeno mistake; a progressive income tax would increasethe tax bill or Illinois’ middle class.o make things worse, it would also destroy jobs andsap economic activity.Quinn and other advocates or tax increases don’tunderstand that taxing the little money amilies havele at the end o the month will not solve Illinois’ direscal problems. Worse, causing urther cuts in theamily budget will only give people another reason toleave the state.Illinoisans shouldn’t be orced to contribute less totheir church, save less or retirement or invest less ineducation.Tese cuts can and should be avoided. Instead o orcing amilies to make dicult cuts, state leadersshould allow amilies to keep more o what they earn.Lawmakers must put taxpayers rst by cutting spendingand cutting taxes.
Benjamin VanMetre
is the Senior Budget and ax Policy  Analyst at the Illinois Policy Institute. Te Illinois Policy Institute’s Fact Finder series aims to debunk myths about pub-lic policy issues that afect Illinois.
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