Friday, July 07, 2006

A tale of two different taxing situations.

The first story below appeared in the Rockford Register Star. In the first article below you will read that legislators are thinking of a tax increase. The second story is an AP story and apppeared in Northwest Herald.

In the first story below Martire made two good statements:

"The honest answer is if you're going to enhance public spending, you need recurring revenue to fund it," Martire said.

"And if you're relying on gimmicks or tricks or borrowing or raiding other funds, every year you create a bigger and bigger deficit position. That's something other than responsible because it's borrowing against future generations to maintain current spending levels."

But the solution is to NOT "enhance public spending" and to NOT "maintain current spending levels". Even his own words show that the real problem is spending, not funding.

After more than 15 years, is a state tax increase inevitable?

By Aaron Chambers
Click here for more information about Aaron Chambers

SPRINGFIELD — The state hasn’t hiked tax rates in more than 15 years.

Will Illinois soon hit you with a tax increase? And, as some observers suggest, would a tax hike be more responsible than the state’s nickel-and-dime approach to generating more cash to spend?

“They come up with so many creative ideas, why don’t they just raise taxes and get by all these games and get a solid revenue stream to take care of our pensions and our debt and our schools?” said Sen. Dave Syverson, R-Rockford.

He was referring to Gov. Rod Blagojevich and fellow Democrats in the Legislature who have shaped the state budget in recent years.

Syverson predicted the state would need to raise taxes to deal with its rapidly growing expenses.

He said a sales-tax increase wouldn’t be feasible because it would drive consumers to the Internet and surrounding states.

But he would consider supporting an income tax increase — perhaps a temporary one — as long as the state stopped diverting dollars from road construction funds and committed to using all new revenue to pay bills and debt.

“Unfortunately the problem can’t be fixed with a few small fee increases,” Syverson said. “It’s going to take a pretty substantial amount of new revenue, unfortunately, just to make up for what’s happened over the last three years.”

John Kenward, a senior analyst at rating agency Standard & Poors, said the state’s nickel-and-dime approach is not unusual.

“There’s not a lot of forward financial planning with the states,” he said. “It tends to be budget to budget, year to year.”

Kenward said it’s heroic for Illinois to keep a lid on taxes to stay competitive with surrounding states. But that at some point, it would need “an overall longer-term plan because the revenues aren’t growing as fast as the expenditures are.”

In April, Fitch Ratings gave Illinois a “negative outlook,” because it must start making dramatically larger payments to its pension systems. Public pension systems have $38.6 billion in unfunded liability, which is the difference between assets and the cost of retirement benefits for everybody covered by the system.

Ralph Martire, executive director of the Center for Tax and Budget Accountability, a fiscal policy think tank, likened Blagojevich’s fiscal style to paying grocery bills with a credit card.

Martire supports an income tax hike to better fund education and other needs.

“The honest answer is if you’re going to enhance public spending, you need recurring revenue to fund it,” Martire said.

“And if you’re relying on gimmicks or tricks or borrowing or raiding other funds, every year you create a bigger and bigger deficit position. That’s something other than responsible because it’s borrowing against future generations to maintain current spending levels.”

The state hiked the personal income tax from 2.5 percent to 3 percent in 1989, according to the state Department of Revenue. The corporate income tax increased from 4 percent to 4.8 percent at the same time.

The state sales tax has been 6.25 percent since 1990.

Blagojevich’s latest plan to generate cash is selling or leasing the state lottery. Skeptics say that would simply postpone an inevitable tax increase, but Blagojevich budget director John Filan disputes that.

Staff writer Aaron Chambers may be reached at 217-782-2959 or

In the story above

Rising gas prices have pumped millions into state budget

[published on Fri, Jul 7, 2006]
SPRINGFIELD (AP) – Rising gasoline prices and the extra tax money they produce have pumped an additional $137 million into the state budget over the past year, analysts say.

To view the rest of the story go to Northwest Herald.

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