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Archive for the ‘Illinois’ Category

I’ve done a couple of posts comparing Reaganomics and Obamanomics, mostly based on data from the Minneapolis Federal Reserve on employment and economic output.

I even did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein upset.

Some of the best evidence about high tax rates vs. low tax rates comes from inside America. Art Laffer (yes, that Art Laffer) and Steve Moore have a great column in today’s Wall Street Journal. It’s sort of Reaganomics vs. Obamanomics, looking at evidence from the states.

Barack Obama is asking Americans to gamble that the U.S. economy can be taxed into prosperity. …Mr. Obama needs a refresher course on the 1920s, 1960s, 1980s and even the 1990s, when government spending and taxes fell and employment and incomes grew rapidly. But if the president wants to see fresher evidence of how taxes matter, he can look to what’s happening in the 50 states. In our new report “Rich States, Poor States,” prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece… Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

Tax rates also lead people to “vote with their feet.” Laffer and Moore look at migration patterns.

Over the past decade, states without an income tax have seen 58% higher population growth than the national average, and more than double the growth of states with the highest income tax rates. …Illinois, Oregon and California are state practitioners of Obamanomics. All have passed soak-the-rich laws like the Buffett Rule (plus economically harmful regulations, like California’s cap-and-trade scheme), and all face big deficits because their economies continue to sink. Illinois has lost one resident every 10 minutes since hiking tax rates in January. California has 10.9% unemployment, having lost 4.8% of its jobs over the past decade. …Every time California, Illinois or New York raises taxes on millionaires, Florida, Texas and Tennessee see an influx of rich people who buy homes, start businesses and shop in the local economy.

Competition among the states is leading some states to make further improvements. Some are even trying to get rid of their income taxes.

Republican governors in Florida, Georgia, Idaho, North Dakota, South Carolina, Ohio, Tennessee, Wisconsin and even Michigan and New Jersey are cutting taxes to lure new businesses and jobs. Asked why he wants to reduce the cost of doing business in Wisconsin, Gov. Scott Walker replies: “I’ve never seen a store get more customers by raising its prices, but I’ve seen customers knock down the doors when they cut prices.” Georgia, Kansas, Missouri and Oklahoma are now racing to become America’s 10th state without an income tax.

I like the quote from Governor Walker. He seems to know what he’s talking about, so it will be interesting to see whether he survives the upcoming recall election. I guess it depends whether voters understand that big government and high tax rates is a recipe for continued decline.

Some states, such as Illinois and California, are filled with voters who refuse to recognize reality. Think of them as the Greece and Spain of America, perhaps because the number of tax-consumers is greater than the number of tax-producers.

And even though parasites should understand it doesn’t make sense to kill their host animals, this cartoon illustrates how the welfare states lures a growing number of people to ride in the wagon. And this cartoon shows the consequences of too many moochers and not enough producers.

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Illinois is a hopeless state, filled with greedy bureaucrats and senseless politicians. Not surprisingly, it’s also a state that prosecutes people who try to protect themselves from criminals.

Here’s part of a story from the Chicago Tribune, featuring an elderly army veteran who was arrested for shooting a burglar.

An 80-year-old tavern owner in Englewood believes it’s “unjust” that he is facing charges after shooting a burglar, but believes he will prevail in court. “It’s wrong,” Homer “Tank” Wright said as he walked into his bar after being released from jail this afternoon. “Unjust that I can’t protect me.” Awakened by his 75-year-old wife, Wright confronted a 19-year-old burglar who had broken through some plywood over a bathroom window in hopes of stealing liquor, according to police. Wright grabbed his 38.caliber pistol, loaded with four rounds, and shot the intruder in the leg. The suspect was arrested — but so was Wright. …Wright said his bar has been broken into four to six times, and he and his wife had started staying overnight at the property to protect it. “This is our living,” he said, adding that he has had triple bypass surgery. “I’m going to be here. I’m not leaving. This is where I’m planning to stay.”

Fortunately, this isn’t like the Trayvon Martin case since both Mr. Wright and the thug are black. So without the distraction of race, we can focus on the genuine injustice of the government making it difficult for innocent people to fight back against crime.

Mr. Wright’s family understands the real issue.

Several of Wright’s relatives cheered in the gallery after the judge ordered him released, drawing a rebuke from deputies. After the hearing, Wright’s grandson Courtney Cook said his grandfather has the right to protect his home and the tavern he has run for 40 years. “You have to look at what’s right and what’s wrong in that situation,” he said. “He’s supposed to protect his home and his family. I mean, you know, is he supposed to be the victim? I mean, you know, just let it keep happening? If it’s going to keep happening, then where’s the law? What good is the law?”

Mr. Wright’s neighbors also have the right attitude.

On his South Side block, Wright is known as a hard-working neighbor who runs a bar that has become a neighborhood institution. Known as “Tank,” Wright has operated the bar next to his home for more than 40 years, neighbors said. …Anita Dominique, head of the block club in the neighborhood, said she has known Wright for more than 30 years. “He is a pillar of our community,” she said. “What does it say to me and other senior citizens that we will be arrested if we defend ourselves?” Neighbors held a news conference this morning to call on prosecutors to drop the charges. “If a man can’t defend himself from harm, what can he do?” asked Darryl Smith. “If he hadn’t defended himself, we would be here for a different reason — because an intruder came in and killed him. “We’re outraged as a community and we’re calling for the state’s attorney’s office to drop the charges,” he added. “This man has done nothing wrong.”

By the way, I’m mocking Illinois, but New York City is equally foolish about penalizing victims.

And you will be flabbergasted by this example of anti-gun zealotry in England.

It’s ironic, in an outrageous way, that the government punishes people for protecting their lives and property, when such actions are only necessary because the government is failing to fulfill one of its few legitimate responsibilities.

This is why I recommend you share this Cato Institute study showing how private guns are frequently used to thwart criminals.

P.S. I suspect these two anecdotes/stories are urban legends, but this interview with a general and this letter-to-the-editor are very much worth reading…and sharing.

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President Obama’s two biggest “achievements” since taking office are the so-called stimulus and government-run healthcare.

But neither one of those policies are popular, so the President largely ignored them during his state-of-the-union address and instead focused on using the tax code to promote “fairness.”

But fairness doesn’t mean treating everyone equally by adopting a flat tax. Instead, it means a class-warfare policy of higher tax rates.

The President’s home state of Illinois is a good test case of this approach. The politicians rammed through a big tax increase early last year, supposedly to stabilize state finances.

Unfortunately, Obamanomics isn’t working very well in Illinois. The state just got downgraded by Moody’s and ranks below even California.

The most damning evidence, though, is what’s happened to the job market. Unemployment is still far too high across the nation, but the vast majority of states are seeing at least modest improvement.

But a tiny handful of states, led by Illinois, are moving in the wrong direction. Here’s a very powerful chart produced by the Illinois Policy Institute. The tax hike is about one-year old, and we’re already seeing strong evidence that jobs are fleeing the state.

Now close your eyes and envision a different map. Instead of American states, imagine a map of the world. And think what it will look like if Obama succeeds in imposing all the tax increases he had endorsed.

I suppose it won’t look as bad as this map because there are plenty of other nations engaging in suicidal tax policy. But it doesn’t take a vivid imagination to understand that Obama’s class-warfare approach would drive jobs and investment to the nations with better tax policies.

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Two days ago, I explained that tax increases are bad policy.

More specifically, I warned that giving more money to government exacerbates fiscal problems because politicians respond to the expectation of more revenue by spending more than otherwise would be the case. And since they usually over-estimate how much revenue a tax hike will generate, that creates an even bigger fiscal mess.

Not surprisingly, I cited Europe to bolster my case. The tax burden has increased enormously in Europe over the past several decades, but that obviously hasn’t prevented a fiscal crisis in nations such as Greece and Portugal. And tax hikes haven’t precluded deteriorating conditions in countries such as Belgium and France.

But I also cited Illinois, which just got downgraded by Moody’s – even though state politicians just imposed a record tax hike.

This caused some angst for a lefty blogger in Illinois, who wrote that, “Operational spending is down since the Illinois tax hike.”

I gather he thinks this is some sort of gotcha moment, but two sentences later he admits that, “If Illinois hadn’t increased its taxes, it would’ve had to cut $7 billion more from spending to balance its budget.”

In other words, his post confirms my point about higher taxes translating into higher spending. He openly admits that the tax hike was a substitute for spending restraint.

What makes his concession so remarkable is that my argument wasn’t even based on one-year fiscal decisions. I”m much more concerned with trend lines, and you can see from the chart that Illinois politicians have been promiscuously profligate in recent years.

Indeed, I developed “Mitchell’s Golden Rule” to underscore the importance of restraining the burden of government so that, over time, it grows slower than the private economy. That obviously hasn’t been happening in Illinois in recent decades – and it’s not likely to happen in future decades if politicians figure out ways of grabbing more revenue.

Speaking of revenue, my accidental friend from Illinois also tries to debunk my point about the Laffer Curve by writing that, “The Commission on Government Forecasting and Accountability has repeatedly said this year that revenues from the tax increase are coming in as the ‘politicians’ expected.”

Well, I don’t know about you, but this is not exactly a rigorous rebuttal. He doesn’t provide a revenue forecast from the pre-tax-hike era or a more recent forecast from the post-tax-hike era, so we can’t make any comparisons. Instead, we’re supposed to blindly accept vague assurances from some Commission.

This doesn’t mean that forecasts don’t exist or that the bureaucrats were wrong about their short-run projections. But that’s not the main issue. The key question is what will happen to revenue over a period of years, particularly once entrepreneurs, investors, and businesses have time to adjust their behavior in response to the more onerous tax regime.

The changes can be enormous, as demonstrated in this post showing how rich people paid five times as much federal income tax after Reagan cut the top tax rate from 70 percent to 28 percent.

It will take a few years before we have a decent idea about the consequences of the Illinois tax hike. But since Illinois is copying European-style fiscal policy, don’t be too surprised if the result is European-style economic malaise.

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I don’t blame the Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that they weren’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls, but they say it’s the right thing to do because of red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying that higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

But we don’t need to look overseas for examples. Look at what’s happened in Illinois, where politicians recently imposed a giant tax hike.

The Wall Street Journal opined this morning on the results. Here are the key passages.

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois. …Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. …This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that. …And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.

Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind.

1. Higher taxes encourage more government spending.

2. Higher taxes don’t raise as much money as politicians claim.

The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.

The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.

Heck, I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more of our income?

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When I read the story from England about needing photo ID to buy teaspoons, I thought British bureaucrats built an insurmountable lead in the U.S. vs. U.K. contest for stupidest government action.

But I should have had more faith in the hare-brained politicians of Illinois. When they’re not busy driving businesses from the state with punitive taxes or lining the pockets of the political elite with graft and corruption, these geniuses display impressive levels of brainless behavior.

In this case, they decided to require identification – and a log – for the purchase of drain cleaner and other caustic products.

Why? Well, because somebody could use them in the commission of a crime. Sort of like the killer teaspoons from England.

Here are some excerpts from a local media report.

A new state law requires those who buy drain cleaners and other caustic substances to provide photo identification and sign a log. It’s getting a rough reception from customers and merchants alike although perhaps none more than a cashier at Schroeder’s True Value Hardware in Lombard. “They’re not very happy about it at all,” said Don Schroeder, one of the store’s owners. …The law, which took effect Sunday, requires those who seek to buy caustic or noxious substances, except for batteries, to provide government-issued photo identification that shows their name and date of birth. The cashier then must log the name and address, the date and time of the purchase, the type of product, the brand and even the net weight. …Jewel-Osco has removed the few items it carried from its shelves, but Schroeder said he does not have that option as a hardware store. He said he does not believe that the precautions written into the bill will prevent such crimes from occurring. “How are they going to find out, by asking every customer, what kid might have done that? It’s not going to solve any problems,” Schroeder said. “It’s not going to cure anything.”

The legislation is disliked by both businesses and consumers, so one might be tempted to think it will be repealed.

But that’s a silly assumption. You have to remember that the bureaucrats in charge of enforcing the law doubtlessly like having another excuse for bigger budgets.

And since Illinois is a state where bureaucrats engage in public protests for more money, they probably have more political influence than the poor saps who actually pay the bills.

One more nail in the coffin of a state that is vying with California to become the Greece of America.

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I’ve already commented on some of the sleazy behavior that infects Chicago politics.

Now we have a jaw-dropping example of what’s wrong with the state of Illinois, as explained by Bill McGurn of the Wall Street Journal.

Soon the Illinois state legislature will meet in special session to consider the Chicago machine’s latest favor: legislation designed to deliver tax relief to three of the state’s largest companies. These tax breaks for the lucky few come just 10 months after the Illinois legislature approved what has been described as the largest tax increase in the state’s history. …In so doing, Chicago is giving America a window into the logic of crony capitalism: Raise taxes on everyone—and then cut side deals with those big enough to lobby for special relief. The legislature is considering this limited tax relief because three corporate mainstays of greater Chicago have threatened to leave without it. One is the CME Group, operator of the Chicago Mercantile Exchange, the world’s largest futures exchange by volume. Another is the Chicago Board Options Exchange (CBOE), the world’s largest options exchange. The last is Sears, one of America’s oldest and most famous retailing giants.

My initial instinct is to have some sympathy for the companies. After all, America’s corporate tax system is brutally anti-competitive. Heck, government gets a greater share of corporate profit than shareholders!

But the column goes on to explain that at least one of the firms gave lots of money to the very same political predators that created the unfriendly tax system.

CME and the other beneficiaries of this special tax bill would have a far better case, however, if instead of pushing for special treatment for themselves, they used their clout to argue for a more market-friendly environment overall. After all, if the state’s tax treatment is making it hard for Sears and CME, the family restaurant or mom-and-pop shop down the corner is probably feeling the pinch too. Alas, equal treatment is not the Chicago way. Maybe that’s why we heard little from corporate Chicago when Mr. Quinn was campaigning for his tax hikes. To the contrary, back in June the Chicago News Cooperative reported that CME donated $50,000 to Mr. Quinn in the general election and $40,000 in the primary, $200,000 to Rahm Emanuel (a former CME board member) during his run for mayor of Chicago, and $150,000 to the man who really runs Illinois, House Speaker Mike Madigan.

I’ve made fun of the OccupyWallStreet protesters on many occasions (see here, here, here, here, here, and here), but this column shows that big business oftentimes does engage in corrupt deals with the political class. This is something that should deeply offend all decent people.

I also think it should offend the judiciary. I’m not a lawyer, so I don’t pretend to know the answer, but I’m guessing that state constitutions (like the U.S. Constitution) have clauses providing for equal protection under the law. So why, then, do they allow these corrupt forms of favoritism?

But I’m probably being naive in thinking that Illinois courts would actually care about justice. As such, don’t be surprised to see more stories like this in coming years.

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