How Would You Like A 66% Tax Hike?
We feel sorry for the residents of the state of Illinois. In their zeal to cover a spiraling 15 billion dollar budget deficit, their legislators decided the best way to compensate for it was to increase their state income tax by 66%. You read that right. Residents and businesses can expect a crude awakening as their tax will increase from 3 percent to 5 percent.
If you’re from a neighboring state, such as Wisconsin, you should prepare for an influx of new residents, as there is sure to be a mass exodus of victims fleeing a government gone wild.
This is the worst possible time to increase taxes in any way, but to increase them by such a dramatic margin is foolish. It will only serve to slow the already lame recovery in the state. When given a choice, consumers will move to more attractive pastures.
It impacts businesses as well as consumers. Retailers who were planning on hiring new employees are now going to hold off until they can asses the impact of this onerous tax increase. Auto shop owners will hold off the purchase of capital equipment, such as a tire changer or an Automotive Lift.
It’s economics 101. It’s been proven time and time again. Until politicians can raise enough courage to make the difficult decision to cut spending, we fear that this scenario will repeat itself over and over again as cash strapped state and local governments follow the same routine of tax and spend.
The states that show restraint will stand to gain, while those that don’t will fall deeper in the hole.