NCPA - National Center for Policy Analysis


August 10, 2005

Columnist Ralph Martire blames Illinois' ''antiquated'' flat-rate income tax and sales tax for the states' budget problems. He argues for complicating the state income tax system by creating multiple higher tax rates, and for expanding the sales tax to include services as well as products.

Martire's ''tax swap'' would reduce property taxes a little and hike income taxes so much that workers and businesses would be socked with a net $2 billion tax increase. It's a recipe for economic devastation -- a condition Illinois' reckless tax-and-spend ways already are taking taxpayers dangerously close to, says Steve Stanek, managing editor of the Heartland Institute's Budget & Tax News:

Compare, for example, Illinois' economy with Iowa's for the first six months of fiscal 2005:

  • Individual income tax collections in Iowa grew 7.4 percent; in Illinois, just 2.9 percent.
  • Corporate income tax collections rose 31.2 percent in Iowa but actually fell 8.2 percent in Illinois.
  • Sales tax collections rose 4.9 percent in Iowa but only 3.1 in Illinois.

All this is evidence that Iowa's economy is surging while Illinois' is sputtering, says Stanek. Moreover, it all has to do with fiscal policy:

  • Iowa state Rep. Jamie Van Fossen, who chairs the Iowa House Ways and Means Committee, has pointed out that from fiscal 2002 to fiscal 2005, Illinois raised state taxes nearly $1.4 billion, while Iowa reduced taxes a net $60 million.
  • Illinois increased state spending $5.6 billion (a 31 percent increase) while Iowa increased spending only $154 million (an increase of 3.3 percent), according to the National Association of State Budget Officers.

By controlling taxes and spending, Iowa lawmakers have helped boost business investment, create jobs, enable Iowans to spend more money -- and increase state revenues. It's a lesson Illinois lawmakers ought to heed, says Stanek.

Source: Steve Stanek (Heartland Institute), "We need thriftiness, not a tax sinkhole," Chicago Sun-Times, August 10, 2005.


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