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Illinois HB 750: The Amazing Tax Increase

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Illinois, now that the Democrats have complete control of the state, is poised to pass HB 750, the so-called tax swap to reform education funding. The idea is to reduce dependence on property taxes for education and increase dependence on income tax, business tax, and other tax increases. Now, in theory if it was a 1:1 swap, that'd be one thing (though I doubt the integrity of the state government in actually passing that money down to school districts).

This is a tax increase under the guise of a tax swap. Income tax will increase by 2%, business income tax will increase by 4%, and there will be a new tax on services at 6%. It is theoretically going to include a tax abatement to reduce the education portion of property tax bills. The estimated increase in taxes will be $7.2 billion; the estimated property tax reduction will be $2.5 billion.

Imagine a 6% income reduction (I assume that the services sales tax will balance out the property tax abatement, at least initially). That is what we'll have with HB 750. All taxes on business will be passed on to consumers because prices are always set to compensate for costs. Combine this with the proposed minimum wage hike, it is an economic disaster. Increased wages will only increase the cost of living. So do increased taxes.

Interestingly, an analysis of DeKalb County shows a very nominal increase in revenue to most school districts with some districts actually losing money. Hypothetical question: do you think the Naperville schools which are successful will get more or less money in the new system? That's right, state funding won't bring the bottom up; it'll bring the top down as it always does.

Illinois has an average business climate with an economy that's below average. The current economic freedom indicator ranks us at 46th in the country. Illinois is currently ranked 23rd in the State Business Tax Climate. Illinois is 24th in unemployment. After this tax increase, the economy in Illinois, which is not great, will suffer greatly. When it is easy to move a business or a family to a friendlier state, why would people stay in a state with a lousy economy?

The property tax abatement, by all indications, will be temporary. There is no obligation for that money to really be passed on to property taxpayers. In the light of an almost $50 billion debt, it is less than likely it will be. More likely, the money will find itself wasted or spent on more corruption. This is Illinois after all. Blagojevich's administration has been defined by money going to friends instead of what it was meant for.

Lastly, there is the idea that money will magically make a better education system. Money can be an important factor, but it certainly isn't the only factor. Anyone who has worked in the private sector (and more importantly the public sector) has seen the tendency to promote incompetence. Everyone knows over-paid and unqualified idiots in positions they don't deserve to have. There are many good teachers out there; there are also many bad ones. They both get paid the same.

HB 750 sounds good if all you hear are the media sound bites. In practice, it is a massive tax increase, some of which will go to the schools, some of which won't. It will drive businesses and entrepreneurs out of the state, it will drive the cost of living up, and it will reduce effective income. It's a sham bill and it's disgraceful that it will likely pass without any real debate (in no small part because the Illinois Republican party is no longer a statewide part).

Hear more about my comments on this from the Extreme Wisdom radio show on WKRS with the podcast here.

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About John Bambenek

John Bambenek is a political activist and computer security expert. He has his own company Bambenek Consulting in Champaign, IL that specializes in digital forensics and computer security investigations.
  • http://wp.blogcritics.org JohnR

    Mr. Extreme Wisdom –

    You do know that Mr. Corrupt Governor is on your side on this one, right?

  • Prestage 1955

    As usual no one stands together against this Governor who has no business since at all.

    As an owner of a small delivery company I can tell you first hand how this Governor cost my business more money when I had to pay over $1,300.00 for the license plates for each truck. In the year 2005 I paid only $750.00.

    He speaks of the blue collar workers being the hard workers and paying more in taxes. How does he figure this. Business’s pay a lot in taxes and now we will either be forced to hire only part time help or close the doors. This will be for many companies.

    Illinois is in terrible shape but they never tell anyone this and unless you operate a business do you know what is really going on. It takes a business person to know how to manage a state and for that matter the country.

    Why can’t anyone get it that he works for us it is not the other way around. Because of his mismanagement the state is broke. We need to make these people responsible for waisting all our hard earned tax dollars. Can anyone tell me why we don’t do just that? It is our money and it is all gone and now this Governor wants to send out letters to companies explaining the increase that is coming.

    Business owners are sure talking about this one and we will see what he is allowed to do.

    it is fair to say that Illinois will suffer at the hands of this Governor a lot more in the very near future. No one wanted him to be our Governor for a second term but what choice did we truly have. Judy sounded like an idiot when she opened her mouth. Also being conected to Governor Ryan didn’t help her much.

    What happens to all the money we pay in tolls? My company spends thousands a year. What about all the money paid for the schools.
    Every year my property taxes goes up at least $500.00 Always for the schools. What about a tax break on those who have no children in school. How far can we get with increasing taxes. What will our children and grand children be able to afford.

    The way I see it, their all crooks and as I stated no business since.
    Don’t’ you think we deserve better? As I see it, they are all a bunch of crooks.