Elections do have consequences. Illinois voters are now being rewarded for electing Democratic Gov. Pat Quinn to a full term. Quinn replaced the disgraced Rod Blagojevich in 2009, then won by a narrow margin in the 2010 election to serve a full term.
Now he is about to sign into law a whopping 67 percent personal income tax increase, and a 46 percent business tax hike. The increases were passed at 1:20 a.m. Tuesday at the tail end of a lame-duck session with no votes to spare and not a single Republican in favor. The new Legislature, sworn in 12 hours later, would have defeated the scheme.
Facing a $15 billion deficit, and lacking $6.8 billion to pay its bills, Illinois Democrats argued that raising taxes was the only responsible thing to do. Of course, the responsible thing would have been to spend less in the years before and to cut spending now rather than boosting taxes. But even in their current crisis, Illinois Democrats prefer to make taxpayers clean up politicians’ mess. In July, for example, Quinn gave 40,000 of the state’s unionized and heavily Democratic workers a two-year, 14 percent pay raise.
Labor and capital are mobile, and more of each will now relocate to states with more favorable tax climates than Illinois — two of which, Wisconsin and Indiana, are within a short distance of Chicago. This has already happened elsewhere. In 2008, Maryland instituted a special “millionaire’s tax” and within a year a third of its top earners moved out of the state, and state revenue actually fell. Similarly, in 2009 Oregonians approved the highest top income tax rate in the nation, only to see revenue fall by 28 percent in 2010. And in California, 93 percent of the state’s drop in tax revenue during the past three years can be attributed to top earners fleeing the state.
Wisconsin’s newly elected governor, Republican Scott Walker, is pushing small-business tax cuts and urging Illinois businesses to “escape to Wisconsin.” Good for him. According to the latest census, states with no or low income taxes are growing fast. Meanwhile, high-tax states such as Illinois, California and New York are losing businesses, revenue, people and congressional seats.
These fiscally irresponsible states, along with Maryland and Oregon, are showing the rest of the country that government cannot tax its way out of a financial hole. This is a lesson that needs to be heeded even more at both ends of Pennsylvania Avenue in Washington, D.C.