Economic Reality

Quinn and Madigan are doing some dirty dancing to avoid the blame of the 67% tax increase just stuck to us all:

• Gov. Pat Quinn on Wednesday defended his plan to sign an income tax hike that's twice as big as he promised during his campaign, saying the state's "fiscal house was burning."
  
  The governor rejected criticism he had double-crossed voters when he cut an 11th-hour deal with fellow Democrats in the General Assembly to raise the personal income tax rate 67 percent.
  
  
• Chicago Democrat Michael Madigan, newly sworn in to his record 14th term as House speaker, blamed the state's deep budget problems on the national economic collapse and the resulting decline in tax revenue.
  
  "When you encountered a 25 percent (drop) in receipts, you have a serious, serious problem to contend with," Madigan said. "Lower receipts, along with overspending over several years, led to yesterday's tax increase vote in the legislature."

Businesses aren't happy:

• While the size of the state corporate income tax hike ultimately was whittled down a bit, Illinois businesses still feel gored, and neighboring states began circling immediately to woo relocations.

  The 11th-hour modification "is a joke," said Ty Fahner, president of the Civic Committee of the Commercial Club of Chicago. "It's like saying I'm going to hit you hard, and now I'm going to hit you a little. I believe it's disingenuous and it puts Illinois in a terrible spot in terms of creating or keeping jobs here."

And neighboring states are ready to move in and destroy the job market here:

• Ben Smith reports on this statement from Governor Scott Walker of Wisconsin, a neighboring state of Illinois:

  Wisconsin is open for business. In these challenging economic times while Illinois is raising taxes, we are lowering them. On my first day in office I called a special session of the legislature, not in order to raise taxes, but to open Wisconsin for business. Already the legislature is taking up bills to provide tax relief to small businesses, to create a job-friendly legal environment, to lessen the regulations that stifle growth and to expand tax credits for companies that relocate here and grow here. Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, ‘Escape to Wisconsin.’ Today we renew that call to Illinois businesses, ‘Escape to Wisconsin.’ You are welcome here. Our talented workforce stands ready to help you grow and prosper.

Think it can't happen? It already has elsewhere:

• Last year, voters in Oregon voted to raise taxes on the highest income earners in the state, giving Oregon the highest tax rates of any state in the nation. It hasn't worked out too well for Oregonians, according to the Wall Street Journal:

  In 2009 the state legislature raised the tax rate to 10.8% on joint-filer income of between $250,000 and $500,000, and to 11% on income above $500,000. Only New York City’s rate is higher. Oregon’s liberal voters ratified the tax increase on individuals and another on businesses in January of this year, no doubt feeling good about their “shared sacrifice.”

  Congratulations. Instead of $180 million collected last year from the new tax, the state received $130 million. The Eugene Register-Guard newspaper reports that after the tax was raised “income tax and other revenue collections began plunging so steeply that any gains from the two measures seemed trivial.”

  One reason revenues are so low is that about one-quarter of the rich tax filers seem to have gone missing. The state expected 38,000 Oregonians to pay the higher tax, but only 28,000 did.

Those with the means to do so will leave Illinois. Those companies able to will move out. Illinois has committed itself to an economic death spiral and the only questions are at what point will it crash and how bad will it be?