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Illinois passes a 66 percent income tax increase

Illinois state capitol

TEXT OF STORY

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.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
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Ohio is about $9 billion in the red, and they passed an income tax DECREASE this year, which they're planning to follow-up with an elimination of the estate tax. This will push Ohio's deficit into double digit billions.

WOW, our neighbor to the west just raised the income tax to the same rate ours has been for YEARS! And now we know why Mitch could claim how great our fical position is and how we didn't have to raise taxes. Gee isn't he doing such a great job considering that he had to sell one highway to get money to fix the potholes and bridges on the rest? We really should elect this guy president, don't you think? Well I don't.

If you follow the link on the right about California, you will see that Mr. Ryan's claim about bailing California out is misplaced. Our state does a lot of good for the union, and while I don't think we should suck up all the benefits from other states, we do deserve a little help, perhaps. I was very disturbed to hear from Sen. Feinstein that she wouldn't be helping us.

At the same time our state needs to cut spending, especially in the prison system, which is failing us and has grown too expensive thanks to the Correctional Officers' lobby. We should increase taxes as well, either through ballot initiatives or legislation.

We need to start making the hard decisions. If we keep voting for people who don't want any government support, then we should in turn not expect anything from our government. We can't complain when the trash isn't picked up, the roads aren't plowed, our schools are deficient and our bridges fall into the water.

As long as you're fine with that, then by all means keep taxes low.

If you'd like police or fire or even a place to go when your sick, raise taxes and raise them high, as these things must be paid for.

We need to start acting like adults.

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