Illinois passes a 66 percent income tax increase
Illinois state capitol
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JEREMY HOBSON: State legislators in Illinois have been burning the midnight oil. Early this morning they passed a whopping 66 percent income tax increase in an effort to close a $15 billion hole in the state budget. Corporate taxes will also go up. Of course, Illinois is not the only state with fiscal challenges.
Let's go live to our Washington bureau chief John Dimsdale.
JOHN DIMSDALE: Good morning.
HOBSON: Big picture in a moment John, but first tell us about the tax increase that was passed this morning in Illinois.
DIMSDALE: Well the income tax there is currently 3 percent, but for the next four years it'll be 5 percent. Which means if you owed $1,000 in taxes last year, this year it'll be $1,666. After 2015, those taxes drop down to 4 percent, but that's still an increase. These new taxes are going to bring in a substantial amount of revenue, but they'll cover only half the projected gap this year in Illinois, so some painful spending choices still have to be made.
HOBSON: Illinois is one of the worst cases, obviously, but there are plenty of states facing similar tough choices.
DIMSDALE: That's right. Governors warn as many as 30 states are facing debt serious enough to consider default. And cities too. As many 100 sizable cities are close to bankruptcy. And this is getting a lot of attention in Washington, with many members of Congress warning states and cities, don't expect help from us. For example, here's House budget chairman Paul Ryan last week.
PAUL RYAN: Should taxpayers in Indiana, who have paid their bills on time and done their job fiscally be bailing out Californians who haven't? No, that's a moral hazard we are not interested in creating.
So the message from Washington is one that's not followed much here -- either cut your spending or raise your taxes.
HOBSON: Marketplace's John Dimsdale in Washington, thanks.
DIMSDALE: You're welcome.