Another Blue State in crisis, raises taxes 66%

[redrumloa]

http://news.yahoo.com/s/ap/20110112/ap_ ... nois_taxes

SPRINGFIELD, Ill. – Democratic Illinois lawmakers beat a looming deadline and approved a 66 percent income-tax increase in a desperate bid to end the state's crippling budget crisis.

Legislative leaders rushed early Wednesday to pass the politically risky plan before a new General Assembly was sworn in at noon, taking a slice out of the Democratic majority and removing lame-duck lawmakers willing to support the tax before leaving office.

The rate increase might be the biggest any state has adopted in percentage terms while grappling with recent economic woes.

 

[faethor]

The result here is Illinois is still one of the least taxed States in the US.

 

[redrumloa]

The result here is Illinois is still one of the least taxed States in the US.

I don't know about that theory and yes the story says that. For all of Florida's faults, we have ZERO state income tax. I couldn't imagine a 5% state income tax, insane!

 

[faethor]

I don't know about that theory and yes the story says that. For all of Florida's faults, we have ZERO state income tax. I couldn't imagine a 5% state income tax, insane!

Insane? Minnesota's rate is 5.35% - 7.85%. So 5% isn't all that insane depending on your point of view.

Here's what I find interesting in taxes. We're told low tax rates means more jobs. We're at the lowest federal tax rate in 50 years but the job market, while increasing, isn't running away. Minnesota is clearly a higher tax rate than Florida. Minnesota's unemployment 6.4%, Florida is at 11.6%. If the sound bite of 'lower taxes means more jobs' is true these numbers should be reversed. When it comes to 'jobs' it's much more complex answer then lower the tax rate.

Now that isn't to say there might not be some relationship. If Minnesota raised it's tax rate to say 80%, for example, I'd bet we'd see impact. I think the low rates we're talking there just isn't a significant impact. Illinois will be interesting to watch does the jump from 3% to 5% mean all that much? And since people are getting a 2% cut from Social Security taxes during this time will anyone really see any difference in their checks? Somehow I think the small step from 3% to 5%, as scary as the 67% increase may sound, isn't going to make any sort of significant differences.

 

[redrumloa]

Here's what I find interesting in taxes. We're told low tax rates means more jobs. We're at the lowest federal tax rate in 50 years but the job market, while increasing, isn't running away. Minnesota is clearly a higher tax rate than Florida. Minnesota's unemployment 6.4%, Florida is at 11.6%. If the sound bite of 'lower taxes means more jobs' is true these numbers should be reversed. When it comes to 'jobs' it's much more complex answer then lower the tax rate.

Now that isn't to say there might not be some relationship. If Minnesota raised it's tax rate to say 80%, for example, I'd bet we'd see impact. I think the low rates we're talking there just isn't a significant impact. Illinois will be interesting to watch does the jump from 3% to 5% mean all that much? And since people are getting a 2% cut from Social Security taxes during this time will anyone really see any difference in their checks? Somehow I think the small step from 3% to 5%, as scary as the 67% increase may sound, isn't going to make any sort of significant differences.

Florida's unemployment is much more complicated than the state income tax, as you can probably imagine. The expansion and collapse of the real estate bubble is the biggest factor, severe corruption in local governments is another problem. It will take years to work through the problems down here, but unemployment should start slowly improving relative to the national level due to the near complete collapse of real estate prices from bubble levels. During the bubble years the cost of living (and doing business) got so out of whack with salaries, there was a huge exodus of population out of the state. You can imagine the snowball effect of all this. Keep in mind the Tri-County area of South Florida is the biggest driver of the state economy. The Tri-County real estate bubble was among the top 3 worst bubbles in the nation.