Illinois Gets 50% Income Tax Hike, Indiana Gets Responsible Government

We've heard for about a decade now about grave financial problems in Illinois. With the economic downturn over the last two years, you might assume that things are pretty much the same everywhere. But in fact, Indiana has been doing pretty well:

Indiana's state budget looked better than it had in years at the end of the 2008 fiscal year on June 30, 2008. Revenues had exceeded spending for the third straight year. Balances had been rebuilt to almost 11% of the budget. Payment delays to local governments were almost completely reversed. And the budget for fiscal years 2008 and 2009 increased education spending more than at any time this decade.

Sounds like a dream, doesn't it? Can you imagine leaders that are capable of this miracle of fiscal responsibility? It isn't as though Indiana hasn't had problems during the current crisis:

Indiana is facing a decline in state revenue that will result in a $763 million deficit for fiscal years 2009 to 2011. The state budget committee projects that Indiana will spend $13.305 billion while taking in $12.542 billion in revenue. “We will adjust our spending to preserve a balanced budget in the state of Indiana,” Gov. Mitch Daniels said. “These are only the first and hardly the last of the hard decisions that need to be made.”

Despite the state's increasing unemployment and the urging of lawmakers to use the state's surplus, $1.2 billion, Gov. Daniel's said that the surplus must be preserved at all costs in case the recession drags on and that money is needed even more down the line.*

So what does Daniels intend to do? What are those "hard decisions" he's talking about? From Sunshine Review, an organization that promotes government transparency, we have some answers:

"There is not going to be new money for anything,” Gov. Daniels said. However, despite declining state revenue Daniels said that there won't be any tax increases for the state of Indiana. His current budget proposal to balance the state budget calls for: a 3 percent cut of the executive agency budget, which already had been cut by 7 percent for fiscal 2009; a 3 percent reduction of spending on grants and subsidies such as planning projects and publications; a ban on out-of-state agency travel unless approved by state budget officials; capital spending and hiring restrictions; no raises for Daniels and state employees in 2009. The pay freeze includes legislators, judges and other state office holders. In Daniels’ plan, there are no calls for cuts in elementary and secondary education, Medicaid, public safety or highway and infrastructure improvements. Daniel's also called for a limit on property taxes. "We have to do all we can to see that the last brick in the protective wall, the wall protecting Hoosier taxpayers, is put in place," Daniels said of his efforts to amend the Indiana Constitution to include tax caps.

(Republican Governor Mitch Daniels took office in January of 2005, and was returned to the office in November.) So it's belt-tightening for office-holders and tax caps for residents in Indiana. Meanwhile, in Illinois:

The state's budget hole has grown to an estimated $11.5 billion -- "an unprecedented tsunami of red ink" -- aides to Gov. Pat Quinn disclosed Friday afternoon as the new governor began to sketch out how he proposes to fix the state's financial woes.

And get this:

Neither he nor aides would say how much but said the intent would be to eliminate the impact on "millions and millions" of voters. Aides said they did not know if most taxpayers would end up paying more or less.

Yes, you read that right. We are in a crisis, a "tsunami of red ink", but they don't know if taxpayers will pay more or less if they increase taxes. Theories, anyone? Are they beginning to see that increasing taxes might just decrease revenue? (I know, I know. I don't think so either.)

Indiana may have a wildly innovative (if you don't have it, don't spend it) approach to the their state budget, but in Illinois, tax increases are the solution that fits every problem:

Gov. Pat Quinn acknowledged today he will seek an increase in the Illinois income tax when he proposes his budget Wednesday, but sought to downplay the tax hike by labeling it “fundamental tax reform” that would lessen the blow on lower-income families.

The Tribune disclosed in today’s editions that Quinn was considering increasing personal income taxes by 50 percent, boosting the rate from 3 percent to 4.5 percent, while also looking to increase the personal tax exemption, currently at $2,000, to as high as $6,000.*

According to Rick Pearson and Ray Long, who reported this redefinition of tax reform on Clout Street, Quinn said the personal exemption will "cut taxes . . . on millions of people who right now are suffering in a very, very difficult economic time." And what about the hidden tax those millions will pay in increased cost of goods and services? Well, it's hidden. Shake a finger at "big business fat-cats", and they'll never make the connection - politically, a very safe bet. But just in case:

The Democratic governor, whose push for higher taxes would become a political issue if he seeks election to the job in 2010, said the public needs to realize that Illinois “has a mountain of debt” that he inherited from Blagojevich.*

We've heard Democrats say for years that economic problems were "inherited" from the previous office holder (in this case whipping-boy Blagojevich), or 'inherited" from Washington, always inherited from someone else. Quinn may want to call this "fundamental tax reform", but I think I have a better idea. Let's just call it "The Not-Our-Fault Inheritance Tax", and be done with it.

Read the sources at:
Chicago Daily Observer "State budget hole deepens to $11.5 billion"
Clout Street, "Quinn says tax increase planned, but tax breaks for some" by Rick Pearson and Ray Long
Sunshine Review, Indiana State Budget
Purdue University, Indiana Government Information Website

(H/T to Frugal Hoosiers)
*Emphasis added.